Copper fell by its daily limit in Shanghai on Tuesday, following a 4.4 percent overnight fall in London prices, after a source said China's State Reserves Bureau was in no rush to restart its suspended copper buying programme.
London copper also reversed early gains as traders digested the SRB news and weighed it against a surprise 32 percent jump in Chinese copper imports in December and the latest cutbacks by metals smelters. Chinese copper stocks rose 28 percent according to Friday's weekly stock data from the Shanghai Futures Exchange.
Production cutbacks also failed lift to market morale Mitsubishi Materials Corp will cut copper production by 10 percent from February and Rio Tinto shelved a $229 million plan to extend its Northparkes copper mine in Australia as it slashes capital spending and seeks to rein in nearly $40 billion of debt. Prices could see support as the SRB is scheduled to meet five or six large smelters for zinc bidding round.
But Meir said, even though the industry had shut down capacity equivalent to 500,000 to 600,000 tonnes per year around 10 percent of the world's total he still expected a small surplus in 2009. "Producers across commodities are all in the same boat, trying to cut production to stay ahead of the demand implosion, but at some point you can't cut any further before you go out of business," MF Global's Meir said.