OREANDA-NEWS. February 06, 2015. Copper slid on Thursday after inventories jumped by 13 percent, evidence of weak demand and excess metal, while traders also sold futures to realise profits from the previous session.

Inventories of copper in warehouses monitored by the London Metal Exchange climbed 32,500 tonnes to 284,600 tonnes to their highest level in nearly a year, LME data showed.

That means LME copper stocks have soared by 61 percent so far this year.

"European demand is weak and getting weaker, so surplus metal is attracted back into warehouses with the ongoing backwardation," said Robin Bhar, head of metals research at Societe Generale in London.

A backwardation, in which cash prices are higher than forward prices, makes it profitable for holders of metal to register metal on the LME. Cash copper was \\$27.75 a tonne higher than benchmark three month futures on Thursday.

Three-month LME copper fell 2.1 percent in official open outcry trading to \\$5,585 a tonne. Prices hit their highest since Jan. 22 at \\$5,755 a tonne on Wednesday before closing with modest gains.

The market was helped on Wednesday by China's central bank making a system-wide cut to bank reserve requirements to unleash more liquidity.

"The market is not too fully convinced that this is the real deal in terms of boosting metals demand," said analyst Dominic Schnider of UBS in Hong Kong.

"The focus remains on why they are doing this in the first place, and the focus is weak activity," he added. UBS expects copper to potentially test the \\$5,000 a tonne level.

China's factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January.

Bhar said some people wondered whether the large rise in copper stocks was linked to speculators who sparked a flurry of selling last month, pushing copper down to a 5-1/2 year low.

"The conspiracy theories would say that it's all designed to give more ammunition perhaps to the bears," he said. "It looks at if copper will be retesting its recent lows, the double bottom around \\$5,350."

Physical demand remains weak ahead of the Lunar New Year in China, traders said, with consumers reluctant to stock up given slowing demand growth and ample supply expected in the world's top user of metals.

Appetite for risk across markets was dampened after the European Central Bank abruptly cancelled its acceptance of Greek bonds in return for funding on Wednesday.

LME nickel dropped 1.4 percent to \\$14,895 a tonne in official trading, aluminium fell 0.9 percent to \\$1,862 and zinc shed 1 percent to \\$2,118.

Lead and tin failed to trade in official rings. Lead was bid down 0.5 percent at \\$1,858 a tonne and tin was bid 0.5 percent lower at \\$18,915 a tonne.