London 05/05/2016 - Base metals continued their retreat on Thursday as China's subpar recovery and fresh United States labour market concerns dampened the mood.
Zinc was the weakest performer - it fell to the cheapest since April 14, while copper and aluminium were at two week lows and lead hit a one week low.
Recent weaker-than-expected manufacturing PMI data in China has raised some doubts about the country's economic recovery following the strong rally in base metals in April.
“Unless and until global manufacturing gets a shot in the arm it will be hard for our markets to find their feet,” Michael Turek at BGC said.
The market largely ignored higher oil prices with Brent up 1.20 percent at $45.45. Meanwhile, US weekly employment claims rose by 17,00 to 274,000, which was significantly higher than the expected 261,000.
“Any positive influence that might have emanated from the energy and currency markets has not been evident at all. The market is clearly spooked by decelerating domestic jobs growth and more particularly by Fed official comments about possible interest rate hikes in June,” Turrek added
Tomorrow's US non-farm jobs data for April, expected at 206,000, is likely to establish a clearer picture of the timing of further rises in US interest rates.
In the metals, copper fell to a low of $4,775 per tonne - its weakest since April 19 – it closed at $4,786 per tonne, still down $81 on Wednesday. Business was robust - nearly 21,000 lots had changes hands by the kerb close.
“The move is partly due to slower than expected drawdown of metal inventory moved into Chinese warehouses in anticipation of renewed demand,” SP Angel noted.
Shanghai bonded copper stocks rose 10 percent to 580,000-610,000 tonnes by the end of April from 530,000-550,000 tonnes a month previously, according to a FastMarkets survey of multiple warehouse companies.
The copper cash/threes spread remains in a backwardation - it was last at $14 after $8.25 back on Tuesday, which suggests the price dip is still attracting short-covering, analysts noted.
The backwardation was supported by an increase in metal booked for removal. Cancelled warrants jumped 7,025 tonnes to 42,600 tonnes - a move centred on New Orleans and Chicago.
Adding to the potential for tightness was the increase in holdings from warrant holders – latest data showed there was one holder in both the ‘Tom’ and ‘next’ position at the 50-79 percent bracket.
Stocks edged 225 tonnes higher to 156,725 tonnes.
Aluminium was last at $1,608, down $22.50. Stocks continue to trend lower - today they fell 6,275 tonnes to 2,620,450 tonnes - while cancelled warrants were up 2,925 tonnes to 1,074,650 tonnes.
The cash/threes spread was last at a contango of $17.50.
Nickel at $9,020 was down $425 even after stocks fell 1,308 tonnes to 415,134 tonnes and cancelled warrants climbed 1,716 tonnes to 129,444 tonnes.
Zinc recently traded at $1,861, down $27 and its weakest since mid-April. Stocks and cancelled warrants both fell 1,125 tonnes to 396,400 tonnes and 31,650 tonnes respectively.
Lead at $1,735 was $28lower after stocks climbed 550 tonnes to 174,675 tonnes.
Lead spreads were tight with cash/threes at a backwardation of $0.25, while cash/May was at $8. Warrant data showed there was one holder for both ‘Tom’ and cash at 50-79 percent and another at 30-39 percent.
Tin closed at $17,350, down $50, with stocks rising 125 tonnes to 5,860 tonnes
Steel billet was indicated at $65/115, cobalt at $23,500/24,000 and molybdenum at $13,300/13,800 were neglected. Cobalt cancelled warrants climbed three tonnes to 56 tonnes.
(Additional reporting by Ewa Manthey, editing by Tom Jennemann)