Copper and zinc led base metals lower on Thursday after Chinese inflation data fanned worries about growth in the world's largest metals consumer. Copper fell to its lowest in nearly three months on the London Metal Exchange, while aluminium dropped to a three-week low and zinc fell to its weakest in two months.
Losses in recent days, mainly due to a buoyant dollar, deepened after data showed that China's consumer inflation cooled more than expected in August, further evidence that the economy is losing momentum. Weak Chinese data had helped support markets on the bet that authorities would unleash new stimulus measures, but investors are becoming increasingly worried, said Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt.
"There's no commitment yet from China to stimulate the economy in the short term," he said. "Copper is the leading metal so it's not surprising to see it coming under massive pressure with this overwhelming pessimism right now in the market." Three-month copper on the LME dropped to its weakest since June 20 at $6,770 a tonne before paring losses to close at $6,835 a tonne, down 0.5 percent.
Adding to pressure on copper, the global refined copper market was seen flipping into a surplus. "The expectation of a surplus was postponed by a couple of different factors ... but we still expect you're probably going to see that by the end of the year," analyst James Glenn of National Australia Bank in Melbourne said.
Aluminium was vulnerable to more losses, said Paul Adkins of consultancy AZ China in Beijing. "We feel the aluminium price is a little bit overbought at the moment. And we don't see enough support from the fundamentals," he told the Reuters Global Base Metals Forum. "All those restarted (Chinese) smelters are now starting to bring metal to the market and there is still 1 million tonnes of new capacity set to enter the picture through the rest of this year."
Commerzbank's Weinberg said the metal was a candidate for a short position with a target of $1,900 a tonne by year end. Aluminium, which gained 13 percent in July and August before prices turned lower, closed 0.9 percent lower at $2,040. It had earlier dropped to its weakest since August 20 at $2,032.50. Zinc ended 1.9 percent lower at $2,265 a tonne. It had earlier dropped to $2,254, the lowest since July 10. Nickel closed down 1.7 percent at $18,425. "We see distinct trendline support at $18,500-$18,600," broker Triland said in a note. Lead ended 0.1 percent higher at $2,118 and tin closed up 0.4 percent at $21,075.
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