Shanghai copper futures fell 3 percent on Monday, following losses in London and jitters in equity and other commodities markets on concerns about the US economy. Confidence in global markets, including commodities and equities, has been seriously dented by the continuing crisis in the US supreme mortgage sector.
"Falls in metals are bigger than expected, and losses could widen after the yen carry trade dried up," said analyst Pang Ying at trading house Shenzhen Rongtup. Spreading fallout from problems in the US supreme mortgage lending market has reduced appetite for risk, leading to the unwinding of currency carry trades borrowing low-yielding units like the yen to fund investments in higher-yielding assets.
The most active October contract on the Shanghai Futures Exchange was down 2,120 yuan or 3.1 percent at 65,830 yuan ($8,704) a tonne. Copper for delivery in three months on the London Metal Exchange was up $15 at $7,680 a tonne after falling more than 2 percent in the previous session following data that showed US employers added jobs at the slowest rate in five months and weaker growth in the US service sector.
Those concerns were also reflected in weaker oil prices, which slid towards $74 a barrel and falls in Asian stock markets. "This is an adjustment in risk appetite," said Gerard Burg, an analyst at National Australia Bank.
"We think fundamentals remain solid and a sell-off like this is more attributable to a risk adjustment. Prices will drift moderately lower next year, but the story remains all about China and we have recently increased our GDP estimates for China to 11.5 percent this year and 11 percent next year."
Nickel continued to languish just above a 10-month low of $28,550 touched on Friday, having lost 40 percent since hitting a record high in May. Analyst Yang Jun at China Futures said: "The downtrend in nickel, which fell from above $50,000 in May, persists and I expect a deeper test of the downside."
Nickel was $100 higher at $29,200. Three-month lead was $35 up at $3,355. Last week, a strike at the Rosh Pinch zinc-lead mine in Namibia owned by South Africa's Exactor Resources, had helped boost sentiment.
But concerns about when the large Magellan mine in Western Australia would come back on stream remained the predominate driver. "There have been a few additional outages in the lead market but Magellan is the key. Company estimates of when production will be back online look a little optimistic," Burg said.
Shipments from Magellan, which accounts for 3 percent of the world's mined lead output, were halted this year after a large number of birds died of lead poisoning at the Port of Esperanto.
Ivernia, which owns Magellan, is seeking permission to ship lead concentrate out in sealed containers through another port, Fermentable, but Burg noted: "The plans to ship via Fermentable may be delayed after fairly unflattering comments about the proposal by the city's mayor."