Copper fell toward its 2012 low on Wednesday as renewed concerns over the euro zone debt crisis pummelled the euro and sent commodities lower, compounding losses after China cut short hopes for a stimulus plan. Benchmark copper on the London Metal Exchange closed down more than 2 percent at a bid of $7,475 a tonne from $7,670 on Tuesday.
The metal used in power and construction earlier reached $7,463 a tonne, its lowest since hitting a 2012 trough of $7,445 on January 9. Copper prices are now down nearly 2 percent for the year, erasing gains of more than 12 percent seen in February. Copper's losses came in tandem with a sell-off across other commodities. Crude oil futures hit a 2012 trough on heightened fears about the European debt crisis, including about Spanish banks, Italian borrowing costs and upcoming Greek elections.
"You had comments from China overnight dashing hopes of a major stimulus program, then you had the Spanish government rebuffed by the ECB in terms of shoring up Bankia with bonds," analyst Leon Westgate of Standard Bank said. China is the world's largest consumer of most metals, accounting for 40 percent of global refined copper consumption last year.
"Obviously it depends what happens overnight. The key will be the point at which China think they've missed the boat in terms of lower prices. Arguably they are looking for lower. That plus copper has broken a key trend line that has been in place since 2008," Westgate added.
Copper on Wednesday broke below $7,530 a tonne, a support line in place since December 2008. It also fell through the psychological level of $7,500 a tonne, souring its technical picture. Further support is seen at $7,445 and at $7,368, a Fibonacci retracement point, traders said.
Giving brief respite to markets, the European Commission said on Wednesday the euro zone should move to a banking union and consider directly recapitalising banks from its permanent bailout fund. Investors are keeping a close eye on Beijing's vows to support the economy after authorities last week approved a list of infrastructure investments.
The world's second-largest economy will allocate an annual fund of up to 2 billion yuan ($315 million) from this year to help develop and mass produce energy-saving vehicles to cut carbon emissions, the government said. China does not need massive fiscal stimulus to stabilise growth and calm investor concerns that the global economy may slip back into a financial crisis similar to 2008-2009, top policy advisers said on Wednesday.
They joined a chorus of commentary countering market expectations that China might unveil a stimulus package similar to the 4 trillion yuan in spending unleashed in the earlier l crisis. "Although the policy actions look exactly like the ones adopted nearly four years ago, they are not a big stimulus package. The projects were planned under the Five-Year Program, spending is more modest, and the projects and industries were chosen more selectively," Barclays analyst Yiping Huang said in a research note. Some traders said they would adopt a wait-and-see stance until there was evidence that demand was picking up in downstream industries.
In other metals, zinc was bid in the closing ring at $1,893 a tonne from Tuesday's close of $1,914 while tin fell to $19,770 from $20,200 a tonne. Reflecting tightness in immediate supply, the premium for cash tin to three-months material jumped to $12, from a discount earlier this week.
Lead ended at $1,922 from Tuesday's close of $1,948 while nickel finished at $16,300 from its Tuesday's close of $16,650, having earlier hit its lowest price at $16,170 since December 2009. Aluminium fell to $1,990 a tonne before closing at $2,007, down from a last bid of $2,016 on Tuesday.