Copper rebounds

Copper rebounded from a 14-month low on Monday but fears of a Greek debt default and the threat of a global recession continued to put pressure on the demand outlook for industrial metals. Three-month copper on the London Stock Exchange (LME) closed at $7,266 a tonne, down from Friday's close of $7,360. It had hit a low of $6,800 - its lowest since July 2010.
Fears about the effect from a potential default by Greece, especially on the banking sector, as well as worries over a US economic slowdown, have aroused fears of a repeat of the market turmoil that followed the collapse of Lehman Brothers in 2008. "The leading indicators are worsening so the outlook for demand is worsening. We've seen lack of demand in Europe and the US and we are likely to see lower demand growth in China. This is reflected in the prices but the question is to what extent," said Eugen Weinberg, analyst at Commerzbank. Copper cut losses as the euro strengthened having earlier fallen after data showed US new home sales fell 2.3 percent in August.
Falls in recent weeks have pushed copper down 23 percent this month, on track for its second consecutive monthly fall. The metal is trading some 25 percent lower year to date.
"Metals are not only being buffeted by the Euro headwinds, but seem to be under additional pressure on increasing signs of a deteriorating global macro picture that inevitably will manifest itself through weaker metal demand," MF Global senior commodity metals analyst Edward Meir said in a note.
Analysts expect to see some bargain-hunting following recent falls, but Chinese buyers are likely to be cautious given recent market volatility, with investors also expected to sit on the sidelines ahead of a week-long national holiday in China next week."There will be some buying over the next weeks but right now considering the national holidays at the beginning of October, I think any buying will be very cautious," Commerzbank's Weinberg said.
Uncertainty about the outlook for demand for industrial metals prompted falls across the base metal complex. Three-month aluminium earlier fell to its lowest level since mid-September 2010 before recovering to close at $2,204 from $2,206 a tonne at Friday's close.
Zinc ended at $1,880 from a close of $1,915 a tonne on Friday. Lead closed at $1,877 a tonne from $1,955. Nickel closed at $18,000 a tonne from $18,270 on Friday when it fell to its lowest level since December 2009. Tin ended at $20,325 from Friday's close of $20,200.
Smelters in Indonesia's main tin producing region of Bangka island have halted all tin ingot exports due to falling global prices, and will meet later on Monday to decide the length of the ban, an industry group said. Meanwhile, about 4,200 workers at Freeport McMoran Copper & Gold Inc's Indonesian mine, mainly contractors and non-union staff, have returned to work, allowing some mining to resume, while parliament will help facilitate talks to resolve the strike. The sharp fall in industrial metals prices brings the possibility of output cuts back onto the agenda, especially for aluminium and nickel and zinc, where high cost producers are starting to feel the pain.