Base metals slumped more than five percent Tuesday, hurt by concern over fresh moves by China to cool its economy and a stronger dollar as investors grew increasingly risk-averse amid worries about eurozone debt. Benchmark copper on the London Metal Exchange closed at $8,150 a tonne, down from a close of $8,645 on Monday. The metal used in power and construction hit a session low of $8,125, its lowest in just over a month.
Other metals such as zinc, lead, aluminium and tin also fell significantly. "It's a sharp change in the attitude to the risk trade," BNP Paribas analyst Stephen Briggs. "The dollar has strengthened, appetite for risk has declined and it's taken all risky assets down with it - stock markets, other commodities, the whole lot.
Concerns over more official steps in China to cool its liquidity-driven asset price rally weighed as the country is a major consumer of commodities. "Fears on Friday of an interest rate hike that didn't appear are still in the market," said Justin Lennon, an analyst with Mitsui Bussan Commodities. China's State Reserves Bureau, which stockpiled a range of base metals in the first half of 2009, announced a tender for aluminium sales, on the heels of similar tenders for zinc and lead.
The SRB will offer 117,000 tonnes of aluminium ingots for sale at auctions on November 23-24. It follows a previous auction of 96,000 tonnes of aluminium from state reserves on November 1-2. Daniel Major, analyst with RBS, said the tender showed China's commitment to keeping a lid on inflation across the spectrum of assets, including metals.
State-backed research firm Antaike said early this month that China is likely to have a deficit of 2.44 million tonnes of refined metal next year, larger than the 2.25 million tonne shortfall expected this year. The global market for refined copper is seen at about 19 million tonnes this year.
A strike continued at Chile's Collahuasi, the world's No. 3 copper mine for a 12th day. LME aluminium saw a large 47,000-tonne increase into LME-bonded warehouses as metal was delivered against short futures positions. Aluminium closed at $2,240 versus $2,400 at Monday's close. It hit its lowest since September at $2,216. Stainless steel metal nickel closed at $20,815 a tonne, down from $22,350.
Zinc closed at $2,139 a tonne having tumbled more than 10 percent since Thursday. Traders said that premiums for material for immediate delivery flared up to $20 as traders who had been long scrambled to find metal. Battery material lead closed at $2,260 from $2,455. It hit its lowest since October at $2,231.75. Tin was at $24,525 from $25,900, having earlier hit a session low of $24,500, its lowest since early October.
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