Copper slid more than 2 percent on Friday, weighed down by fresh worries about Spain's debt crisis, a stronger dollar and top metals consumer China's warning against relaxing curbs on speculation in the copper-hungry property sector. Three-month copper on the London Metal Exchange closed 2.5 percent weaker at $7,545 per tonne, touching the lowest level in a week.
It was a sharp reversal from Thursday when copper touched a two-week high of $7,813 and the losses meant that copper ended the week 2 percent lower after rising 2.2 percent last week. "After seeming to have broken free from the influence of euro zone and currency issues in recent days, it seems that link between the metals and euro chaos has been temporarily re-established this morning," analyst Walter de Wet of Standard Bank said in a note.
Spain's heavily indebted eastern region of Valencia said it would apply to Madrid for financial help, complicating central government efforts to stave off a full-blown bailout. The euro plunged to more than two-year lows against the dollar and Spanish 10-year bond yields extended their rise above the 7 percent level that is seen as unsustainable. A stronger dollar makes commodities priced in the unit more expensive for holders of other currencies.
Copper, used extensively in construction and seen as a bellwether for the health of the global economy, has remained in a range between about $7,500 and $7,800 per tonne so far this month. "At some point we will get a trigger that's going to break prices out of these ranges. But because it's not obvious in what direction that trigger will take us it's very risky to take a directional position. Until we get a clear macro picture, people are going to keep positions very light," Barclays analyst Gayle Berry said. Metals markets tracked lower in Asian trading after Beijing issued a reminder to local governments to keep clamping down on property speculation, underlining official concerns about renewed inflationary pressures even as China's broader economy slows.
"The government's latest comments on property purchase curbs dashed the hopes of those who were looking for a reversal on current restrictions," said CIFO Futures analyst Zhou Jie. China is the world's second biggest economy, using the most copper, aluminium, iron ore, steel and coal, and the second-largest consumer of oil. But after almost a decade of growing at about 10 percent a year, the economy is slowing.
In Chile, world No. 1 copper producer Codelco said its underground Chuquicamata mine is operating normally despite a strike by a group of contract workers. In aluminium, three month prices fell along with the rest of the markets, finishing 2.5 percent lower at $1,895 a tonne, but certain spreads tightened.
The September-October spread flipped into a backwardation as high as $4.50 a tonne on Friday compared to a contango of $7.00 earlier this week. One trader said long holders were taking advantage of shorts needing to roll positions forward. Daily average primary aluminium output in June dropped to 67,700 tonnes compared with 67,900 in May and 70,000 in June 2011, figures from the International Aluminium Institute (IAI) showed on Friday.
Including China, June's average output was 123.8 million tonnes, up from a revised figure of 122.1 million tonnes in May. In other metals, tin, ended down 0.9 percent at $18,930 a tonne while zinc, used in galvanising, did not trade at the close, but was bid at $1,839, down 2.5 percent from Thursday's close of $1,887. Battery material lead slipped 1.5 percent to end at $1,901 a tonne and nickel lost 0.6 percent to close at $15,950.