Copper slipped on Friday alongside other markets on worries about the fallout from Greece, but losses are likely to be capped by a weaker dollar and expectations that further price falls could lead to production cuts. Greece will vote on Sunday in a bailout referendum that could decide whether the country stays in the euro zone.
"Base metals are following equities; there isn't very much liquidity," one trader said. "But Greece really isn't an issue for metals. It's what happens in China that's important." Prices of copper, used in power and construction, are expected to come under pressure in coming weeks from a seasonal lull in Chinese demand. China accounts for about half of global consumption estimated at about 22 million tonnes this year.
Benchmark copper on the London Metal Exchange was untraded at the close but bid at $5,758 a tonne from $5,795 at Thursday's close. A weaker US currency makes dollar-denominated commodities such as copper cheaper for holders of other currencies. "The (US) jobs report yesterday weakened the dollar," said Vivienne Lloyd, analyst at Macquarie. "Prices here exert a lot of pressure for production cuts."
And shrinking supplies of high-quality concentrate in the first half of this year because of disruptions in top miner Chile are a potential plus for copper. Three-month aluminium closed at $1,710 a tonne, down from $1,724 on Thursday. Aluminium is already under pressure from excess supply, a problem that is likely to worsen as metal leaves LME-approved warehouses at a faster rate after new measures to reduce queues.
This oversupply is reflected in the physical premiums for aluminium over the LME cash contract. In Japan, aluminium premiums for July-September shipments were mostly set at a six-year low of $100 a tonne, plunging 74 percent from the previous quarter. Nickel fell 1.6 percent to $12,000 a tonne, zinc edged down to $2,019 from $2,022 and lead was bid at $1,769 from $1,792. Tin fell to $14,350 from $14,450. "Somewhat unexpectedly, Indonesian exports of refined tin rose last month, despite the majority of producers signing up to an agreement to maintain a 4,000-tonne ceiling on monthly exports," Capital Economics said in a note.