Copper tumbled to one-month lows on Monday as concern about policymakers' ability to solve Europe's debt crisis and worries about economic and demand slowdown spurred investor selling. A stronger dollar also weighed on metals, making dollar-priced commodities costlier for holders of other currencies.
Benchmark copper on the London Metal Exchange ended at $8,754.5 a tonne from $8,821 at the close on Friday. The metal used in power and construction touched $8,620 a tonne, its lowest since August 11, after comments from the European Central Bank reinforced eurozone growth fears.
Other industrial metals followed. Tin slid to $22,400 a tonne, the lowest since August 9 and zinc to a one-month trough at $2,135.50. "Macroeconomic fears, the debt crisis are dominating sentiment," said Andrey Kryuchenko, an analyst at VTB capital. Worries about a Greek default gathered pace after the resignation of Juergen Stark, Germany's top official at the ECB, because of his opposition to the bank's controversial bond-buying programme.
In addition to this, the OECD's leading indicator for the world economy fell for a fourth straight month in July, adding to a pessimistic broader assessment of economic prospects that it made last week. "There are fears about the slowing economy, fears about debt, fears about default, and we are not having co-ordinated multilateral actions being taken" said analyst Robin Bhar of Credit Agricole.
"A second factor has been the sharp fall of the euro on the back of those fears, which is putting pressure on market sentiment. Fears have never gone away, and from time to time they resurface." Uncertainty over copper demand growth also came from a report that Chile's Codelco, the world's top copper producer, had said some of its European and US clients asked to cancel orders due to fears there will be less demand amid global financial turmoil.
"Clearly this feeds directly into fears about slowing demand. It's not good for the market, although the fact that this happened just before the mating season makes me think this may be a move from consumers to try and get better prices," Bhar said. Copper consumers and producers typically start negotiating prices for the next year around October.
Even an improving import number from China failed to lift sentiment. China's copper imports rose 11 percent from a month earlier to 340,398 tonnes in August, official customs data said. Copper stocks in LME-approved warehouses fell only 100 tonnes to 465,125 tonnes and remained about a third higher than in December 2010, data showed.
Inventories of copper in warehouses monitored by the Shanghai Futures Exchange rose 5.1 percent last week to 113,300 tonnes. "This hints at some easing of tight conditions in the copper market," Credit Suisse said in a note.
Workers at Freeport McMoRan Copper & Gold's Indonesian mine are set to strike from September 15 to October 15 unless the firm meets their demands for a pay rise. Three-month aluminium reached $2,333, its lowest since August 25. It closed at $2,372 a tonne from $2,367 on Friday.
"Sure, aluminium is going to fall in line with other metals, but factors such as higher production costs and robust demand mean the downside may be a bit more supportive," Bhar said. "After all, the transport and packaging industry are going to increase their aluminium consumption."
Low interest rates and a global economy on the brink of another recession mean the bank financing deals that have locked up most aluminium stocks in warehouses will remain intact and inflate premiums for already struggling consumers. Tin closed at $23,450 from $23,505 on Friday, and zinc at $2,214 from $2,185. Battery material lead was trading at $2,423 from $2,450 and nickel at $21,600 from $21,150.
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