Copper fell as much as 4 percent on Monday after a sharp jump in inventories fanned pessimism about Chinese demand. Copper stocks on the London Metal Exchange grew 7,275 tonnes to 237,925, the highest level since March 2004. The increase followed gains of 6,775 and 6,575 at the end of last week.
"Prices are a bit weak," said Simon Toyne, an analyst at Numis. "One of the most noticeable things is the copper stock builds that have been going on the LME - the last few days have seen a number of thousands of tonnes ... which is a bit unnerving."
"Copper as with most other spot traded commodities, is now into the cost structure, but probably a lot less deeply than some of the other metals," Toyne said. A measure of Chinese manufacturing activity showed factory output shrank sharply in October in the face of waning orders, while officials pledged further steps to boost domestic demand to keep the economy from slowing too much.
Three-month copper on the LME fell on Monday as low as $3,934 a tonne, reversing an earlier high of $4,270. It officially closed at $4,090 versus Friday's close of $4,099 per tonne. "Bouncing around looking a bit directionless," said Gayle Berry, an analyst at Barclays Capital. "When prices are coming off quite a bit, you do tend to see the shorts beginning to look for a bit of cover."
"That is what you are going to see much more of going forward - these violent swings in prices, given the size of the short positions being built in some of the metals." Prices for the metal, used in construction and power, have fallen more than 50 percent since reaching a record high of $8,940 a tonne in July.
In October, LME copper fell nearly 36 percent, its biggest drop since at least 1970. Nickel dropped 24 percent, its second biggest fall on record. "I don't see any dramatic turnaround this month in commodities. Manufacturing is slowing in China. Industry is slowing down and for the next couple of weeks at least there is no light at the end of the tunnel," said Peter McGuire of Commodity Warrants Australia.
Aluminium rose as much as 2.6 percent before moving lower. It closed at $2,050 compared with Friday's close of $2,045. Prices for the energy-intensive metal have dropped about 40 percent since reaching a high of $3,380 a tonne in July. A number of mining companies have been forced to cut production, reduce capital expenditure and postpone new projects as metal prices have fallen close to or below marginal costs.
United Company RUSAL said it had suspended production at the Zaporozhye Alumina and Aluminium Complex in Ukraine because current metal prices make the plant unprofitable. Nickel closed at $11,995 a tonne in volatile trading compared with $12,100 at the close on Friday. Tin climbed 8.2 percent to $14,500 a tonne compared with the close on Friday of $13,400.
Zinc was at $1,170 from $1,125 a tonne, while lead was trading down $5 at $1,500 a tonne. On the macroeconomic front, a relatively thin week for data is set to be dominated by interest rate verdicts from both the European Central Bank and the Britain's Bank of England on Thursday.