Copper was steady on Tuesday after hitting a six-month low and zinc pared losses after touching a 2-1/2-year low, but worries persisted that a global economic slowdown will dent demand for industrial metals. Concerns about the macroeconomic outlook were also highlighted by the decline in US crude prices to a three-month low of $118 a barrel amid rising Opec supply and weaker demand in the United States and Europe.
"What we are seeing is more of a nervousness across the whole of commodities that hasn't left base metals untouched," said Gayle Berry, analyst at Barclays Capital. Copper for three-month delivery on the London Metal Exchange last traded at $7,620/7,625 a tonne from $7,610. The metal, used in construction and power, earlier declined to a 6-month low of $7,530 after LME copper stocks rose to their highest level since February.
Copper for September delivery fell 35 cents to $3.44 a pound at 1608 GMT on the New York Mercantile Exchange's COMEX division. "While this is arguably a seasonal build up ... the dominant warrant holder in copper has failed to keep pace with rising inventory, allowing its position to slip," said analyst Leon Westgate at Standard Bank in a research note.
As a result the backwardation - the premium paid for cash metal over three months prices - has narrowed to $140 per tonne from this year's peak at $241 on July 17. Traders are waiting for an interest rate decision from the US Federal Reserve due at 1815 GMT. Expectations are the benchmark funds rate will be held at 2 percent, but the market will scrutinise the statement for clues to the health of the US economy.
Zinc slid to $1,746 a tonne on rising stocks in LME warehouse, which rose 2,500 tonnes to 161,825 - the highest since September 2006. The increase in inventories is likely to pressure prices even lower, Barclays Capital said in a research note. Earlier the metal, mainly used to galvanize steel, hit a 2-1/2-year low of $1,730 from $1,769 at the close on Monday.
Nickel dropped as low as $17,450 a tonne, a 2-year low, before closing at $17,600 a tonne from $18,025. The metal has fallen 50 percent since its high this year of $35,950 a tonne as the market priced in lower demand from stainless steel mills. Lead climbed to $2,015 a tonne from $2,000 on Monday when it shed 6 percent.
The battery material has been one of the few metals to have rallied recently on the back of Chinese demand and rising cancelled warrants - material already reserved. Tin fell to a 2-month low of $20,100 a tonne from $20,600. The metal, widely used in food packaging and to solder electronic products, has fallen 20 percent since hitting a record high of $25,500 on May 15.
However, tin prices are expected to hold at their current level because it has stronger fundamentals than many other metals in the group, Edward Meir, analyst at MF Global, said in a research note. Aluminium for delivery in three months was steady at $2,900 a tonne, up from $2,882. The energy-intensive metal has been declining in line with oil prices and hit a three-month low on Monday.
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