Copper prices fell to three-year lows on Thursday before partially recovering alongside a brief rebound in US equities, but worries about the global economic outlook should keep the metal under near-term pressure. "We have been running back and forth with the equity markets today," said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.
US stocks were up more than 3 percent at one point, while European equities recouped some of their earlier losses, although mining shares such as BHP Billiton and Rio Tinto fell between 6.2 percent and 6.5 percent. Copper for three-months delivery on the London Metal Exchange fell to $3,815 per tonne, its lowest since October 2005, before closing at $4,040, compared with $4,160 at the close on Wednesday.
In New York, copper for December delivery ended down 6.10 cents at $1.8045 a lb on the New York Mercantile Exchange's COMEX division, up from an early trough at $1.7180 - another three-year low. Higher oil also helped sentiment. Crude bounced back after a 7.5 percent fall on Wednesday as investors focused on expectations oil cartel Opec will opt to cut output at its emergency meeting on Friday.
But analysts were wary of the long-term sustainability of any rise in metals prices. "The single most dominant factor responsible for the very negative sentiment in base metals has been concerns on the macro economic view as well as the recessionary environment we are facing," Sudakshina Unnikrishnan, a commodity analyst at London's Barclays Capital, said.
"There is actually no good news coming in at all - most metals are trading at or below marginal cost of production across the board." Copper is down more than 50 percent from its record high of $8,940 per tonne hit in early July, while nickel is down more than 80 percent since a record of $51,800 per tonne in May 2007. "All of the commodities are adjusting to the lack of demand amid this global slowdown," Future Path's Lesh said.
Several analysts and traders expected more falls in the short term. "Further downside in copper - indeed in all industrial metals - looks likely in the short term," analyst John Reade at UBS said. "Especially if deleveraging and disinvestment continues to hit growth assets and help the dollar." Chile's state-owned Codelco, the world's largest copper miner, echoed that sentiment, with Chief Executive Jose Pablo Arellano telling reporters in Santiago on Thursday that the super cycle of high copper prices was over.
The dollar hit a new two-year high against the euro as worries over the outlook for the global economy sparked a flight to safety among investors. Once one of the tightest markets, the backwardation for copper - premium for cash material over three months -- has fallen sharply from $240 per tonne in July to a small contango (discount) this week. Inventories have doubled since May and currently are around 209,000 tonnes - close to their highest since February 2007.
But LME data shows that more than 90 percent of the stocks on warrant are held by a single dominant market player. However, some analysts and traders said the sell-off was overdone and saw room for brief price spikes on bargain hunting.
"The world is just trying to get to grips with what is going on," one LME trader said. On the recent metals sell-off he added: "It's just a complete way of releasing capital to pay for equity losses ... there's a lot more to come because there are cracks being papered over."
Nickel tumbled 10 percent to $9,000 but closed at $9,350 per tonne, down from $10,000 on Wednesday. Among other LME metals, aluminium was last bid at $2,006 a tonne after earlier falling to $1,958 - its lowest point since November 2005.
Lead climbed 1.2 percent to close at $1,275 a tonne versus $1,260/1,261 on Wednesday. Zinc closed at $1,200 a tonne from $1,140 on Wednesday, as traders cited short trading. Tin slipped to $10,799 a tonne, its weakest since January 2007, before rebounding to close at $12,000 versus $11,550 on Wednesday.