LONDON: Copper prices fell to eight-month lows on Tuesday as nervousness about the health of the global economy prompted investors to sell assets perceived as risky, although traders said further falls were limited by consumer buying on expectations longer-term demand for the metal will remain intact.
Benchmark three-month copper on the London Metal Exchange fell to $8,736.25 by 0929 GMT, from a close of $8,870 on Monday, but rebounded from an earlier low of $8,446.25, its lowest level since early December 2010.
"Macroeconomic data has worsened over the past weeks and on top of that we have the debt crisis in the euro zone and the credit downgrade in the United States. What is of concern is that compared to 2008, policymakers now have no further room for interest rate cuts or additional stimulus measures," said Daniel Briesemann, analyst at Commerzbank.
"Everything depends on the equity markets and the behaviour of the players on the financial markets. If they continue to panic sell to try to get cash then we will probably see sharply lower base metals prices."
Other industrial metals, however, recovered from sharp falls hit in the previous session, with zinc , nickel and tin rebounding. Traders cited consumer buying after the metals hit multi-month lows on Monday.
Nervousness about a cut to the US debt rating by Standard and Poor's, and worries about a recession continued to put pressure on European stocks, and sent safe haven assets such as gold and the Swiss franc soaring.
Copper has shed close to 3 percent so far this week, bringing total losses to more than 8 percent for the year-to-date.
Volumes traded on copper was at around 20,000 lots, after a hefty 38,000 on Monday and more than 39,0000 lots on Friday, the highest level for the year so far.
Traders said consumers had stepped into the market on bargain hunting, but buying was limited ahead of the US markets opening.
"We have seen consumer buying from China and Europe. Some are shocked by the big drop and want to wait a bit until it has settled and the big question is whether the Americans will buy when they come in," a metals trader said.
Stock markets futures pointed to a sharply lower open for US equities.
CHINA PRODUCTION
China's refined copper production hit a record 478,000 tonnes in July, breaking the previous record of 477,000 tonnes in June, data from the National Bureau of Statistics showed on Tuesday.
The country's consumer price inflation quickened to 6.5 percent in July from June's 6.4 percent, the National Bureau of Statistics said on Tuesday, topping market forecasts for a reading of 6.3 percent.
"It (the data) could mean we might see lower imports for copper and aluminium but I don't think the market is reacting to fundamental data today," Briesemann said.
"On the other hand especially in the case of aluminium we have seen a large drawdown of inventories in China over the last couple of weeks. The same also applies to copper so I wouldn't be too worried about the high production rates."
Latest data shows aluminium stocks in LME-monitored warehouses fell by 9,950 tonnes, with no inflows and continued drawdowns in East Asia, as well as the United States.
Aluminium rose to $2,409 a tonne from Monday's close of $2,386. Aluminium has been underpinned by expectations power cuts in China will crimp domestic supply and it may have to buy on the international market.
Tin rebounded from lows of September 2010 hit in the previous session to trade at $22,600 from $22,505. At the start of the year, tin's tight fundamentals suggested it would be a star performer this year, and attracted speculative inflow that is now being forced out.
LME zinc rose to $2,106 from $2,091, bouncing back from 9-month lows. Nickel also rebounded from 9-month lows to trade at $21,345 from $21,250.
Copyright Reuters, 2011
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