Copper plunges

Copper dipped on Friday as concerns over sovereign debt in Europe and the nuclear crisis in Japan undermined sentiment, but expectations of a supply deficit this year lent support. Three-month copper on the London Metal Exchange closed at $9,685 a tonne, down from $9,727 at the close on Thursday.
Still, copper has risen around 9 percent since hitting last week's nearly three-month low of $8,944.50 following the March 11 earthquake and tsunami in Japan. "One of the key concerns is the ongoing sovereign debt crisis in Europe. We have already seen some downgrades, and there is speculation that Portugal is going to ask for a bailout," said Credit Agricole analyst Robin Bhar.
Standard & Poor's downgraded Portugal's credit rating by two notches to BBB on Friday and warned it could be cut again by one notch as early as next week, depending on the final shape of the eurozone bailout fund. "The events in North Africa, the Middle East and Japan cause concern as well. But the fundamentals are still broadly supportive," Bhar added, underlining that a strong copper supply deficit is expected this year.
Workers trying to cool a crippled Japanese nuclear plant were exposed to radiation levels 10,000 times higher than normal, officials said, but they played down suggestions that a reactor was leaking. A slightly stronger dollar also weighed on base metals. A weaker US currency makes dollar-priced commodities more affordable for foreign investors.
"The market sees the recent price increases a little bit overdone," said Eugen Weinberg, an analyst at Commerzbank. "A somewhat stronger dollar is an excuse to take some profit today." Global No 1 copper producer Chile's Codelco said on Friday its 2010 output dipped but should be steady this year, and expects strong Chinese demand, Japan's recovery after a natural disaster, as well as new uses to stoke demand.
Aluminium reached a 2-1/2 year high at $2,654.50, before trimming gains to close at $2,641. "The gains seen in aluminium is really more of a relative play in the market," said GFMS Metals Consulting Managing Director Neil Buxton. "Despite the gains seen it has massively underperformed the rest of the sector, and I really think investment funds are focussing on that fact when they look at what they perceive to be value."
He added there was a big oversupply of aluminium, with brimming inventories in LME warehouses. On Friday, data showed aluminium headline inventories fell 5,925 tonnes to 4,602,950 tonnes, but remain still less than a percent from record highs. Analysts say there are around another 4 million tonnes being held off the LME.
The world's top aluminium producer, Russia's UC RUSAL, believes that prices of the metal may reach $3,000 per tonne by the end of this year due to Japan and events in north Africa. Inventories of copper rose 4,650 tonnes to 439,275 tonnes, hitting their highest since July 5, the latest data showed. Rising inventories coupled with weakening premiums for spot copper raised some concerns over waning demand from top consumer China.Tin, untraded at the close, was last bid at $31,750 from $30,925, while zinc, used in galvanising, closed at $2,378 from $2,424 Thursday's close.
Mitsui Mining and Smelting Co, Japan's top zinc smelter, said it would resort to imports of bare metal as its 110,000 tonne-a-year Hachinohe zinc smelter in northern Japan would probably remain shut for a while after the quake and tsunami damaged the facility. Battery material lead was $2,670 from $2,716, and nickel was $27,050 from $26,825.