Copper prices slid to their lowest in nearly two weeks on Friday after workers restarted wage talks at the biggest copper mine and China increased its interest rates, sparking concern about a clampdown on speculators.
Workers at BHP Billiton's Escondida copper mine in Chile, the world's biggest, prepared to re-enter dialogue with the company on Friday after BHP solicited government mediation in a bid to avoid a strike.
Copper hit a two-month peak earlier in the week when workers rejected a company wage offer and voted for a strike.
Benchmark copper on the London Metal Exchange closed down 1.9 percent at $5,772 a tonne, the weakest since January 23 and the third straight loss. It fell nearly 1 percent on Thursday. Also pressuring base metals was the move by China's central bank to raise short-term interest rates on the first day back from a long holiday, in a further sign of a tightening policy bias as the economy shows signs of steadying.
"The higher rates basically indicate that this year controlling excessive financial risk has become a top priority of the authorities," said Xiao Fu, head of commodity market strategy at Bank of China International in London. "The positioning for some of the metals have been quite elevated, so that triggered some unwinding."
Nickel prices also fell, but were still on track for a 7-percent weekly gain after the Philippines said it would permanently close half its nickel production. LME nickel ended 1.6 percent weaker at $10,225 a tonne, recovering from a low of $10,025, as Chinese markets reopened after a week-long break. The Philippines ordered the closure of 23 mines this week, mainly nickel producers, as part of a government campaign to fight environmental degradation by the industry.
The Philippine move will potentially result in a loss of 50,000 tonnes of supply in the global nickel market and deepen this year's supply/demand deficit to 97,000 tonnes, said Jim Lennon, senior commodities consultant with Macquarie. "A moderate deficit becomes a significant deficit," he said in a note. "The immediate impact of such a programme of closures will be to raise nickel ore prices."
Helping cap the LME losses was a reversal in the dollar index, which sunk into the red after US jobs data showed a smaller than expected rise in wages last month, raising doubts about the strength of the economy. A softer dollar makes commodities priced in the currency cheaper for buyers using other currencies. Aluminium added 0.3 percent to close at $1,835, zinc shed 1.9 percent to close at $2,796, lead declined 0.6 percent to $2,325 and tin, untraded in closing rings, was bid down 0.4 percent to $19,765.