Copper slides

Copper fell on Wednesday following gains the previous day as investors ditched metals along with other risk assets after protests in Spain and Greece renewed fears about the euro zone debt crisis and its drag on global economic growth. Three-month copper on the London Metal Exchange fell 1.7 percent in official trading to $8,133.50 per tonne, after rising 1.1 percent in the previous session.
The metal widely used in construction and the power sector had gained about 16 percent from early August until hitting a 4-1/2 month peak last week on the back of central bank stimulus measures. Copper has eased 3.5 percent from last week's high of $8,422 a tonne.
"There's higher risk aversion now that the euro zone debt crisis is back in focus again. Just take a look at the pictures from Spain at the violent protests, this is putting pressure on cyclical commodities," said Daniel Briesemann, analyst at Commerzbank in Frankfurt. Analysts and investors were divided about whether metals would be able to build on its gains, with ANZ Bank's metal analyst Nicholas Trevethan forecasting more losses. "We may see copper slide towards $8,000, maybe even $7,800 in the next four to six weeks," he said.
On the Shanghai Futures Exchange, the most active January copper contract fell 30 yuan to close the session at 59,150 yuan ($9,400) per tonne. Traders said Shanghai copper prices were also under pressure from weak buying interest in China ahead of the country's National Day holiday, for which the market will be closed from September 29 to October 7. "Small- and medium-sized companies usually face a credit crunch towards the end of September, when banks stop lending in preparation for their third-quarter financial reporting," said a Shanghai-based physical trader.
Although three-month tin fell 2.8 percent to $20,850 a tonne in official rings, tightness in nearby material kept spreads at their highest levels in over two years. The premium of cash metal over the three month contract was at $99 a tonne on Wednesday, down from $120 per tonne on Tuesday, the highest since August 2010, but still strong compared to $27 a week ago.
The backwardation, however, was expected to draw metal into LME warehouses and may ease the situation, Triland Metals said. "The spread remains tight but there is tin beginning to be offered around as the back will attract material to the market," Triland said in a note on Tuesday evening. Last week, nearby tin spreads surged as shorts scrambled to cover positions, facing off against a party holding a large position.
Latest LME data show one party holds 40-50 percent of combined stock warrants and cash contracts and another one has a 30-40 percent position. Aluminium did not trade in official rings, but was bid at $2,075 per tonne, down 1.4 percent from Tuesday's close. Galvanising metal zinc shed 1.9 percent in official trading to $2,095 per tonne, nickel fell 1.9 percent to $18,050 and lead lost 1.8 percent to $2,282.50.