Copper was steadier and aluminium fell to its lowest in more than a month on Wednesday, as concerns about continued demand weakness offset fresh hopes for pro-growth policies from top metals consumer China. Aluminium fell more than other metals under the weight of comments late on Tuesday by producer Alcoa Inc which reported a third-quarter net loss and slashed its aluminium demand forecast.
Base metals prices have suffered this year due to lower-than-expected demand from top consumer China, which has seen a significant slow down in economic growth. Benchmark copper on the London Metal Exchange (LME) closed at $8,165 a tonne from a close of $8,145 on Tuesday. Earlier, the metal used in power and construction hit $8,110.50, its lowest since September 26.
"Copper demand is surprisingly low this year and I expect copper to move sideways in the short term but there will likely be a jump in China's copper imports at the beginning of the next year, before new projects and stimulus measures are approved by the new government," said Eugen Weinberg, a commodity analyst at Commerzbank in Frankfurt.
"I believe that China will come back next year and many will be surprised to see how much it will drive demand for all metals due to new economic measures and infrastructure plans." Hopes for new stimulus policies which would boost demand for industrial metals in China, grew in recent weeks, and found some support in Chinese media reports this week. Chinese state-backed media said major insurance firms had boosted their combined stock holdings by more than 10 billion yuan ($1.6 billion) over the last three trading days and would continue to support bluechip stocks and stock markets.
Another paper said China was likely to offer incentives to spur vehicle sales in rural areas. Investors waited for data from China, including September trade figures, third-quarter gross domestic product and industrial output over the coming week. Aluminium closed at $2,009 a tonne from a $2,055 close on Tuesday. Earlier it hit a session low of $2,006.25 a tonne, its lowest since September 7. Analysts said the fall was fuelled by Alcoa's announcement it had slashed its 2012 aluminium demand growth estimate by 1 percentage point to 6 percent.
"Alcoa seems to blame weak Chinese demand for the current development but I see it differently. I think it's not the demand in China which is depressing prices but the developments on the production side," Weinberg said. "Chinese aluminium production increased by about 10 percent in the first 8 months of the year and elsewhere demand only fell by about 2 percent. This is not enough, there is a huge oversupply at the moment." Tin closed at $21,825, unchanged from the close on Tuesday, while zinc, used to galvanize steel, changed hands at $1,974 from $2,007. Battery material lead closed at $2,197 from $2,251.50 and nickel at $17,670 from $17,930.