Commodity prices fell on Thursday and copper hit six-week lows after ECB President Mario Draghi failed to offer immediate action to shore up the fragile euro zone economy which the market had expected to come via an announcement of large scale bond purchases.
That followed a string of dismal manufacturing sector reports from China, Europe and the United States this week, with only a small gleam of improvement seen in China's small- and medium-sized private sector companies.
China accounted for more than 45 percent of global commodities demand, and 40 percent of refined copper consumption last year, and infrastructure spending is expected to lend some support to copper prices.
"Of course the export market is one of the driving forces of the Chinese economy, but don't forget about China's infrastructure investment plans," said commodities analyst Bonnie Liu of Macquarie in Singapore.
"We are quite constructive about the Q4 outlook. We see lower prices as a buying opportunity. Demand is slowly but steadily improving," she added.
China will hike railway spending by 64 billion yuan ($10 billion) to 580 billion yuan in 2012, the Ministry of Railways said this week, updating an investment plan published this month.
Three-month copper on the London Metal Exchange traded at $7,360 a tonne by 0707 GMT, up 0.42 percent from the previous session, when it hit its lowest since June 22.
Prices have dropped about 3 percent so far this week, on track for their biggest weekly decline in two months.
The most-traded November copper contract on the Shanghai Futures Exchange slipped 1.01 percent to close at 54,100 yuan ($8,500) a tonne.
The European Central Bank indicated on Thursday it may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs but the conditions it set and the dissenting voice of its key German member disappointed markets.
ECB President Mario Draghi indicated that any intervention would not come before September -- and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds.
Share markets also steadied. European stocks inched higher in early trade on Friday, halting the previous session's sharp pull-back, as investors await U.S. jobs data that could potentially fuel expectations of further stimulus from the Federal Reserve. .EU
The U.S. non-farm payrolls data, due later in the day, is likely to show job growth picked up slightly in July, not enough to change expectations of more help from the Federal Reserve to stimulate the faltering economy.
There were signs of renewed interest in Shanghai copper with rising premiums for nearby material against that further forward.
The August contract traded 500 yuan higher than the November contract at the close.
Still, a Shanghai-based trader said there was not a huge uptick in enquiries from users of metal.
"Fundamentals are not really showing much improvement in the last couple of weeks. Domestic inventories are only slowly declining, so it doesn't really give a lot of support for prices to rally further," he said.
Two industry sources said they saw stockpiles in bonded warehouses in China at around the 530,000-tonnes mark, down from an estimate of 550,000 tonnes in early June.
ANZ pointed to the potential for further price falls ahead, based on chart analysis.
"We see potential for further weakness, down towards USD7,250 based on chart patterns, but fundamentals are more neutral," ANZ said in a research note.
Base metals prices at 0707 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7360.75 30.75 +0.42 -3.15
SHFE CU FUT NOV2 54100 -550 -1.01 -2.28
HG COPPER SEP2 332.20 3.15 +0.96 -3.32
LME Alum 1851.00 7.00 +0.38 -8.37
SHFE AL FUT NOV2 15295 -20 -0.13 -3.47
LME Zinc 1825.00 13.00 +0.72 -1.08
SHFE ZN FUT NOV2 14570 00 +0.00 -1.52
LME Nickel 15450.00 200.00 +1.31 -17.42
LME Lead 1869.75 15.75 +0.85 -8.12
SHFE PB FUT 14860.00 -45.00 -0.30 -2.78
LME Tin 17600.00 170.00 +0.98 -8.33
LME/Shanghai arb^ 592
Shanghai and COMEX contracts show most active months ($1=6.3674 Chinese yuan)