Copper fell to its lowest in more than a year, as escalating fears over an economic slowdown in the United States, Europe and China and mounting worries over a debt default in Greece triggered a brutal sell-off of the industrial metal.
|||Copper fell to its lowest in more than a year on Friday, as escalating fears over an economic slowdown in the United States, Europe and China and mounting worries over a debt default in Greece triggered a brutal sell-off of the industrial metal.
Other base metals were also aggressively sold with tin and nickel at one point falling by more than 14 percent and 11 percent respectively.
Benchmark copper on the London Metal Exchange (LME) traded at $7,260 in rings, down about 5 percent from a close of $7,674 a tonne on Thursday. It fell to its lowest since August 2010 at $7,115.75.
The red metal used in power and construction was on track for its steepest weekly loss since December 2008 after losing almost 8 percent in the previous session.
“Base metals are macro sensitive so there was a very dramatic sell-off in copper also aided by the PMI data in China,” said Andrey Kryuchenkov, an analyst at VTB Capital.
“I think it's overdone, but as I say there is extreme risk aversion... Yet open interest is down which suggests longs closures rather than new short positions. Support is now at $7,000 per tonne.”
Data on Thursday showed the manufacturing sector contracted for the third consecutive month in China, suggesting the world's No.2 economy may not be able to provide much of a counterweight to flagging US and European growth.
China is the world's largest consumer of industrial metals.
Comments from a European Central Bank Governing Council member and from Greece's finance minister over the possibility of a Greek default also fuelled the grim market sentiment.
Supply tightness concerns did little to stem further copper price falls and talks of a strike extension beyond one month at Freeport Indonesia's Grasberg copper mine lifted prices only briefly.
SUPPLY CUTS
Fuelling the commodity liquidation this week the dollar rallied against the euro and other currencies as the dismal economic outlook sent investors out of stocks and other bets on growth and into dollar-denominated assets such as Treasuries.
A stronger US currency makes dollar-priced commodities costlier for holders of other currencies.
Tin hit its lowest since July 2010 at $17,000; nickel fell to its lowest since Dec. 2009 at $16,800; zinc hit a 14-month low at $1,894 and lead hit a 13-month low at $2,000 .
“Aluminium, zinc, nickel and tin are all trading below their marginal cost of production so if prices stay at current levels, would think we start to see a supply side response to what has already been projected as a tight market going into year end and early next year,” RBC said in a research note.
Tin shipments from top exporter Indonesia could fall by more than half to 40,000 tonnes per year if benchmark prices for the metal remain at current levels or below, an industry association said on Friday.
Aluminium , which was more resilient than other metals, fell to its lowest since November 2010 at $2,187.
“We believe that although the risks from slowing global growth could pose further threat to aluminium prices, the downside risk is likely to be limited due to a combination of strong global demand, rising energy prices and other input costs,” said Metal Bulletin Research analyst Kamil Wlazly.
“Additionally the Chinese supply/demand balance continues to tighten and low interest rates should ensure that inventory financing and LME delivery bottlenecks will keep the metal out of the physical market at least until mid 2013.”
The metal, used in packaging and transport trading at $2,205 in rings from $18,880.
Zinc changed hands at $1,956 from $2,008 and lead at $2,021 from $2,105 at Thursday's close.
Tin , untraded in rings, was bid at $19,000 a tonne from a close at $19,850, while stainless steel material nickel , also untraded in rings, was bid at $18,000 from $18,880. - Reuters
Source: http://www.iol.co.za/copper-extends-slide-1.1143739
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