LONDON: Copper hit fresh 6-1/2-year lows on Thursday on concerns a spike lower in the oil price foreshadowed weaker global economic growth, though a recovery in Chinese shares helped limit losses.
Declining oil prices reduce costs for mining companies, allowing them to continue to produce at lower metals prices, potentially creating surpluses.
Brent crude slid to a new 12-year low on Thursday as the prospect of more oil supplies from Iran loomed, although the price later steadied.
"Global economic growth appears to be weakening. The slump in the oil price is in effect telling us that global growth is extremely weak while trade activity on a global basis we know is struggling," said Robin Bhar, head of metals research at Societe Generale in London.
"I struggle to see any bullish catalysts in the near term, and I suspect we'll have to go lower to act as an incentive for producers who so far have held off from biting the bullet and cutting output."
Three-month copper on the London Metal Exchange shed 0.5 percent to $4,368 a tonne in official trading, after earlier sinking as low as $4,329.50, the weakest since May 2009.
Copper has dropped about 7 percent year-to-date after sliding by about a quarter last year.
Adding to investors' jitters, China's yuan currency slipped again on Thursday, despite the efforts of the authorities.
"At the beginning of the year, we've got mediocre Chinese numbers, the yuan devaluation, oil, and the U.S. manufacturing gauge which doesn't give us a beautiful picture," said analyst Dominic Schnider of UBS Wealth Management in Hong Kong, who said he expects copper to head towards $4,200 a tonne.
Helping to limit losses on metals markets, however, was a rebound in Chinese stocks, which ended as much as 2 percent firmer.
Also tempering the downside was flaring out of nearby LME copper spreads on Wednesday to the highest in a year, signalling a lack of immediate on hand supply.
"Maybe this is a little positive sign that this year might be better than its start," Triland said in a note.
LME data also showed that one party was the dominant holder of the LME's inventories and cash positions in copper, holding over 50 percent, which traders said could be linked to the tight availability.
Aluminium, however, bucked the weaker trend after six large Chinese aluminium producers earlier this week were considering forming a join venture to stockpile the metal.
Three-month aluminium, the only LME metal in positive territory, added 0.5 percent to $1,470.50 a tonne in official rings.
Tin also probed the downside, sliding as far as $13,095 a tonne, the lowest since July 2009, before paring losses. Tin failed to trade in official midday rings and was bid down 0.8 percent at $13,250.
Lead dropped 0.4 percent in official trading to $1,621 a tonne while zinc, untraded in official rings, was bid down 0.1 percent at $1,492 and nickel was bid 0.2 percent lower at $8,375.
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