Industrial metal prices were hammered on Monday in volatile trade as worries about falling demand and the deteriorating health of the global economy gathered pace. Copper fell to a 9-month low, aluminium to a 9-week low, zinc and tin touched 1-month lows and lead saw its lowest level in six months.
Prices of copper for three-month delivery on the London Metal Exchange ended down at $6,375 a tonne from $6,545 at the close on Friday. Earlier on Monday, the metal used widely in the power and construction industries hit $6,357 a tonne, the lowest since March 15. That is a loss of nearly 25 percent since early October, when demand concerns emerged.
Prior to that, many analysts had expected China to make up any shortfall of demand from the United States, the world's largest economy, where the housing market slump and subprime mortgage crisis have triggered a global credit crunch. "The malaise in financial markets is spilling over into commodity markets," said Edward Meir, analyst at MF Global.
"The inflation numbers were very high last week, we could be looking at stagflation - high inflation with low growth." High inflation means that the US Federal Reserve will in the future find it difficult to cut benchmark interest rates to boost economic activity.
Industrial metals were the worst performing sector, against precious metals and energy, in terms of spot price performance last week, Deutsche Bank said in a note.
"This complex continues to struggle in an environment of falling nominal interest rates in the US, lower global equity markets and rising LME inventories," Deutsche Bank said. London-listed miners fell in line with falling base metals and equity prices. BHP Billiton, Rio Rinto and Swiss-based Xstrata fell more than 3 percent.
"Today the miners will be down again because of fears of growth and the imminent cuts to consensus earnings for fourth quarter 2007 due to the current weakness in copper and nickel," Credit Suisse said in a note. Aluminium ended down a touch at $2,410 a tonne from $2,415 on Friday and an earlier $2,393, the lowest since October 9.
The metal is seen as especially prone to economic problems in the United States and could see much lower levels before the year ends, analysts said. Nickel closed at $25,700 a tonne from $26,500 on Friday and tin at $16,050 from $16,200. Earlier tin hit $15,900, matching the low on November 21.
Lead, under pressure for some weeks now on expectations of rising supplies from Australia, ended at $2,430 a tonne, up from a session low at $2,371, but below Friday's close at $2,480. "A few longs (a bet on higher prices) out they are getting out," a trader on the LME floor said. He added that funds were wary of taking on large positions ahead of the end of the year. Zinc ended at $2,297 a tonne, from an earlier low at $2,251 and compared with $2,325 on Friday.