Copper drifted lower on Friday, as a hefty rise in inventories and persistent worries about weakening demand for metals dragged down prices. Consumer buying creeping in after a sharp fall in the previous session helped support prices but was not enough to disrupt the downward trend as ongoing concerns about demand from the United States and China continued to haunt investors.
Copper for three-month delivery on the London Metal Exchange traded down at $6,483 a tonne in official rings from $6,530 on Thursday when it lost almost 3 percent and hit $6,480, the lowest since November 22. "The market's still quite nervous over the whole credit crunch issue," analyst Leon Westgate at Standard Bank said.
Big financial institutions announcing losses over their exposure to the US subprime sector and its negative impact on the US economy have been dragging down industrial metals, alongside global financial markets.
Coupled with rising inventories as a result of softer demand and uncertainty whether China, the world's top consumer of metals, will be able to make up for the loss has caused copper to lose around 20 percent since the start of October.
"People are just being cautious and really not doing much and the metals are seeking direction from wider global markets," Westgate said. In global financial markets, Asia lost ground overnight but European shares bounced from one-week lows. London-listed miners traded mixed. Rio Tinto was slightly lower while BHP Billiton gained half a percent.
The US Federal Reserve has cut its benchmark Fed funds rate by a quarter-percentage point to 4.25 percent on Tuesday, disappointing some analysts who were expecting a bolder cut.
The bank's intervention in markets the next day in an orchestrated move with the world's major central banks was not enough to soothe investors as the US data suggested the Bank had a difficult task. Investors will keep an eye on US consumer prices for November, due at 1330 GMT and November industrial production, which will be released at 1415 GMT.
Supply and demand dynamics do not offer a better picture. "Inventories are rising and keeping the whole complex under some pressure," analyst Robin Bhar at UBS said. "There's a little bit of buying on the dips but it is not enough to stop the downturn and I cannot see the prices sustained around these levels."
Stocks of copper in LME-registered warehouses rose a hefty 3,675 tonnes to 193,900 tonnes, having doubled since July. Concerns about steep losses last month at a large hedge fund pressured copper. A source familiar with the matter said hedge fund Red Kite Metals suffered 22 percent losses in November.
In other base metals three-month lead traded at $2,450 a tonne from $2,455 on Thursday. The metal, used extensively by battery makers, has lost around 36 percent since mid-October on the back of rising inventories and higher supply outlook. Zinc traded at $2,345 from $2,375 while steel making raw material nickel was up at $26,100 from $25,650. Aluminium was quoted at $2,412/2,412.5 a tonne from $2,417 and tin traded at $16,100 versus $16,055.