Copper fell nearly 3 percent on Thursday, shrugging off a softer dollar, dragged lower by the persistent poor demand outlook, while aluminium and lead fell on news that China may cut or abolish export taxes on the metals.
China may reduce or cancel taxes on exports of primary aluminium and refined lead, and it may allow copper smelters to import some concentrates duty free, as part of its move to boost exports and improve firms' operations. "If the export tax is abolished the risk is that you will see a flood of lead material coming out of China," said Stephen Briggs, commodity strategist at RBS Global Banking & Markets.
Industry sources said Beijing was considering removing a 10 percent tax on exports of refined lead and reducing taxes on exports of unwrought primary and alloyed aluminium to 5 percent from 15 percent.
Copper for three-months delivery on the London Metal Exchange closed at $3,696 a tonne, after falling as low as $3,653 earlier, from $3,755 per tonne on Wednesday when it rose to its highest in almost two weeks. "The fundamentals - all doom and gloom - have not changed," analyst Robin Bhar at Calyon said, adding that fears over weak demand still haunted investors.
China, the world's top copper consumer, cut its interest rates on Wednesday, in a bid to cushion the blow from the global financial turmoil and to boost growth. Macroeconomic data from the United States and Europe continued to be grim.
"The base metals are...just feeling that the broader economic issues are still going to weigh heavily on the market," analyst William Adams at Basemetals.com said. The world's top miner BHP Billiton painted a gloomy near-term outlook for metals demand, telling its Australian annual meeting that uncertainty in commodities markets would continue in the short term and that it was ready to close loss-making operations.
Its former take-over target Rio Tinto was more positive, looking for a recovery in the second quarter in China, and increased demand for its raw materials. Aluminium dropped towards a three-year low after a hefty jump in stocks. Three-months aluminium dropped to $1,792 per tonne from $1,800 at the close on Wednesday.
The lack of demand could be mirrored in the 44,325 tonne jump in aluminium inventories, which are now close to 1.8 million tonnes, almost doubling since the start of the year and at their highest since December 1994.
Lead sank more than 7 percent to its lowest since August 2006 at $1,100 per tonne on the possible China export move. It closed at $1,106 versus $1,186 on Wednesday.
Zinc traded at $1,220 from $1,260, while nickel was lower at $10,250 from $10,600. Tin fell 7.3 percent to a low of $12,000. The metal was last quoted at $12,400/12,600 versus $12,950 on Wednesday.