Copper hit a one-month low on Wednesday, pressured by worries about the outlook for demand after factory growth in top consumer China slowed in November, while a poor bond sale in Germany intensified concerns about the eurozone debt crisis. Three-month copper on the London Metal Exchange (LME) ended at $7,240, down from a close of $7,330 a tonne on Tuesday. The metal used in power and construction earlier fell to a one-month low at $7,168 a tonne in intra-day trade.
Metals markets have been battling mounting evidence of slowing Chinese factory growth, a potential European return to recession and a political deadlock in the US over budget reduction, all of which cast a shadow over industrial demand next year. Chinese factories saw with their weakest activity in 32 months in November, a preliminary purchasing managers' survey showed, reviving worries that China may be skidding towards an economic hard landing and compounding global recession fears.
Adding to the negative sentiment, one of Germany's worst bond sales since the launch of the euro prompted concerns the debt crisis was even beginning to threaten Berlin on Wednesday, with the Bundesbank forced to buy large amounts of the bonds to ensure the auction did not fail.
The dollar traded higher against the euro and a basket of currencies, making commodities priced in the US unit more expensive for holders of other currencies. "There is a fear that the eurozone debt crisis could choke growth because the eurozone is a key trade partner of China and the United State and that just doesn't help sentiment on the broader market," Andrey Kryuchenkov, analyst at VTB Capital said.
"A slowdown in eurozone growth could affect Chinese exports and that's one of the key drivers of their economy." China is the world's top consumer of base metals, and accounts for around 40 percent of global refined demand. Aluminium also hit its lowest in more than a year, while nickel touched its weakest in two months. Reflecting fears of a slowdown in European growth, eurozone industrial new orders slumped in September from August, EU statistics showed, the deepest fall since December 2008 and far worse than economists had forecast. "A sharp decline in LME three-month copper in September was one of the primary real-time indicators that Europe was entering recession," the bank said.
Copper has fallen 9.4 percent so far this month, and is down nearly 25 percent in the year-to-date. Markets are seen choppy ahead of US Thanksgiving holiday on Thursday that is expected to drain liquidity this week. "The market is still in 'sell the rallies' mode. You look at Europe and it's grim," a London trader said. The world refined copper market was in deficit of 161,000 tonnes in the first eight months of the year, compared with a deficit of 339,000 tonnes in the same period last year, an industry report showed on Tuesday.
The industry body sees a 250,000 tonne production deficit in 2012, before easing to become near balanced in 2013 as global growth slows, it said in October. On balance, new mine supply is not expected to meet climbing demand, although new medium-sized projects will come onstream.
Anglo American said this week it expects its Chilean Los Bronces mine to more than double annual copper output from 2010 to produce a peak of 490,000 tonnes of copper annually, to become the world's No 5 copper mine. Tin closed at $20,200 from $20,800 a tonne on Tuesday. The Indonesia Commodity & Derivative Exchange (ICDX) will launch a physical tin contract and palm olein contract in early 2012.
Zinc, used in galvanising ended at $1,914 from $1,940 and battery material lead closed at $2,005 from $2,019.50. Aluminium ended at $2,023 from a last bid of $2,070. It hit its lowest since late August 2010 at $2,016. Nickel finished at $17,045 from a close of $17,550 on Tuesday.