Copper fell 5 percent on Tuesday on a stronger dollar and as a jump in inventories added to concerns about demand. Copper dragged all metals lower, with aluminium falling to its lowest level since July 2003 and zinc down 4.6 percent. "Demand has vanished. Supplies are still growing as evidenced by the inventory accumulation so there is more pain to come," Robin Bhar, an analyst at Calyon, said.
Three-month copper on the London Metal Exchange was at $3,342 a tonne at the close compared with Monday's $3,430. Earlier prices fell 5 percent to a low of $3,259.50. But prices could stabilise this week as Barack Obama, the new President in the United States, settles in, said analyst Edward Meir of MF Global.
"We still maintain that despite the current weakness, markets could stabilise somewhat over the current week, as the Obama administration rushes to unveil new proposals in an attempt to get ahead of the mounting economic crisis," he said in a report. Stocks of copper and aluminium, the two biggest contracts on the LME, have been growing as prices for the two metals have slumped about 60 percent since last July's record highs.
Copper inventories in LME warehouses jumped 15,425 tonnes - the biggest one-day jump since September 4 - to 409,100 tonnes, the highest price since January 2004 when prices were around $2,375. The stronger dollar, which makes metals more expensive to holders of other currencies, also pressured prices. The global economic slowdown is expected to hit trading volumes on the LME and the exchange said it expects volumes to fall about 10 percent from last year.
Market watchers are waiting for China's fourth quarter gross domestic product data later this week for further signs of the economic health of one of the top users of industrial metals. China's economy in the fourth quarter probably grew 7.0 percent from a year earlier, posting its weakest expansion in nearly a decade, according to a recent Reuters poll of 28 economists. The forecast compares with 9.0 percent growth in Q3.
Aluminium closed at $1,400 from $1,424 a tonne. It earlier fell 3.8 percent to $1,370, the lowest price since July 2003, as inventories continued to climb. Aluminium stocks rose 15,325 tonnes to 2.55 million, edging closer to the record high of 2.66 million in June 1994. Output cuts announced by producers have yet to impact the market and are so far being outweighed by the slump in demand.
Alcan, the aluminium unit of mining group Rio Tinto, plans to cut another six percent of output, the firm said on Tuesday. Daily average primary aluminium output in December fell to 68,700 tonnes, the International Aluminium Institute said. The data does not include information from China.
Nickel fell as much as 4.2 percent to $10,830 a tonne and was last traded at $11,550 against Monday's $11,300. Prices for the metal, the key ingredient in stainless steel, have slumped about 80 percent since its record high of $51,800 a tonne in May 2007 on a lack of demand. The world's top producer of nickel, Russia's Norilsk Nickel, forecast its 2009 revenue would fall by more than half and it would have to cut costs.
Lead fell to 3.3 percent a low of $1,136 a tonne from Monday's $1,175 and was last traded at $1,165. Lead stocks gained 4,175 tonnes to 49,700, the highest level since October 2008 and the biggest one-day surge since June. Zinc was last at $1,250, after earlier falling 4.6 percent to a low of $1,202, from $1,260 on Monday. Tin rose to $11,300 from $11,150 on Monday. It earlier dropped 3.8 percent to a low of $10,725.