Benchmark copper on the London Metal Exchange (LME) briefly hit a one-week low at $7,385 a metric ton (1.1023 tons) after the ECB announced it was keeping interest rates on hold at 0.75 percent.
The metal used in power and construction was untraded in official rings, but bid at $7,394 a metric ton, from Wednesday's close of $7,425 when it hit near one-week lows.
Attention now turns to a news conference that began at 1230 GMT with ECB president Mario Draghi to see what plans may be afoot to bring Italian and Spanish borrowing costs down to more affordable levels.
"We have had supportive comments from European policymakers and the market will be looking for those strong, supportive words to translate into action. People are expecting action and there is pressure on the ECB to do something," said Andrey Kryuchenkov, analyst at VTB Capital.
"If the ECB disappoints, copper is likely to sink to the bottom of the current wider range, with $7,350 offering intermediate support and longer-term support at $7,200."
Reuters reported on Monday that the main idea under consideration is re-activating the ECB's bond-buying program for Spain and Italy in tandem with the euro zone's rescue funds, but that action could be at least five weeks away.
Reflecting a lack of conviction about copper's short-term price direction, the open interest in the LME copper contract hovered around near-five-year lows hit last week.
"Open interest is extremely low. The majority of players are struggling to put together a macro view for the rest of the year. Sentiment remains negative. There needs to be more clarity about what is happening in Europe," Kryuchenkov said.
The ECB's decision comes a day after the Fed stopped short of offering new monetary stimulus, even as it signaled more strongly that further bond buying could be in store to help a U.S. economic recovery that it said had lost momentum this year.
DEMAND OUTLOOK
While further stimulus measures from central banks could boost prices for metals and hard assets against paper currency, worries still linger about the demand outlook for industrial metals in light of weakening global economic growth.
Copper prices have fallen by close to 15 percent since hitting a 2012 peak in February at $8,765, dropping by 9 percent in the second quarter on worries about the outlook for demand from top consumer China, which has remained sluggish this year.
China accounts for around 40 percent of refined copper demand.
A downturn in forward indicators of coal, iron ore and steel prices is ominous, say shipping firms and bulk commodities traders.
"Hope for a boost in 2H12 consumption, as a result of Chinese infrastructure and other central bank stimulus measures spending, continues to be overshadowed by euro-fears which has kept a lid on commodity prices generally," RBC Capital said in note.
Battery material lead traded at $1,881 in official rings, from Wednesday's close of $1,884 and aluminum traded at $1,854.50 from $1,861.
"The spread between LME (aluminum) and Shanghai is around 1,500 yuan per metric ton in favor of importing, and we may see some tick up in Chinese imports data later this month," ANZ analysts said in a note.
"However record high physical premiums elsewhere in Asia of around $180 a metric ton may keep the material from flooding into China as swiftly as the arbitrage suggests.
Zinc, used in galvanizing, traded at $1,820 in rings, flat from the previous session's close, while tin was at $17,675 from Wednesday's close of $17,800 a metric ton.
A physical tin contract launched this year in the world's top tin exporter Indonesia is struggling to attract enough liquidity to challenge the benchmark London contract, with the exchange authorities now looking to the government to boost volumes.
Nickel was untraded in official rings, but bid at $15,590 a metric ton.
(Additional reporting by Melanie Burton in Singapore; Editing by Anthony Barker)
Source: Reuters
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