MARKETS-METALS (UPDATE 4)
* Market trading on sentiment, not fundamentals
* U.S. demand seen improving, doubts about China
* Coming up: May Empire State Manufacturing survey 1230 GMT
(Adds official prices)
By Pratima Desai
LONDON, May 17 (Reuters) - Copper tumbled on Monday to its lowest since early May on a sell-off triggered by renewed worries about Europe's debt crisis and sovereign default.
Stainless steel ingredient nickel slid 5 percent to a one-week trough of $20,460 a tonne, aluminium ceded 4 percent to $2,015, its lowest since February 9 and zinc fell nearly 5 percent to $1,955, its lowest since February 5.
Battery material lead surrendered 5 percent, hitting a nine-month low of $1,845 a tonne.
Benchmark copper on the London Metal Exchange traded at $6,751 a tonne in official rings from $6,925 at the close on Friday. The metal used in power and construction earlier fell to $6,685 a tonne, its lowest since May 5.
"It's mostly to do with risk-aversion. There are new shorts (bets on lower prices) in the base metals market," said Andrey Kryuchenkov, analyst at VTB Capital. "The market is trading on sentiment, not fundamentals."
Also weighing on metals was the higher dollar, which makes metals more expensive for holders of other currencies.
The dollar rose to a four-year high against the euro, which fell on doubts about a $1 trillion package and worries that tightening will hurt growth in the euro zone.
The market has in recent weeks speculated the Greek government could default on its debt, rather than submit to austerity measures, designed to rein in its ballooning deficit.
German Chancellor Angela Merkel said on Sunday that the $1 trillion EU rescue plan had only bought the euro zone time to tackle its fundamental problem.
FUNDAMENTAL POWER
Traders say if copper prices fall below support at $6,600 a tonne then the next target is the February low below $6,300.
"People are looking at $6,300 for copper, it's not impossible, especially if the sell-off gets a second wind this afternoon when New York come in."
Before then, copper support is seen at $6,632, the May low.
However, analysts expect improved fundamentals, especially in the United States, to eventually prevail. Economic data from the world's largest economy last week showed industrial production powered ahead in April.
Also on the radar was Japan's core machinery orders, which rose in March, suggesting capital spending will keep rising moderately as the economy recovers with the help of Asian demand.
Doubts could weigh about demand growth in China, the world's largest consumer of industrial metals, because of policy tightening measures designed to rein in price pressures.
"While Chinese demand growth is set to slow, we believe this is being overplayed, and we are seeing the first tangible signs of a recovery in U.S. and other developed world demand over the past two months," Macquarie said in a research note.
"We see copper balancing up over the next six months and moving into deficit in the first half 2011."
Aluminium, used in transport and packaging, traded at $2,040 a tonne in official rings from $2,101 on Friday, zinc at $2,003 from $2,055, lead was bid at $1,900 from $1,940, tin at $17,650 from $17,550 and nickel traded $21,150 from $21,555. Metal Prices at 1206 GMT Metal Last Change Percent Move End 2009 Ytd Percent
move LME Alum 2033.00 -68.00 -3.24 2230.00 -8.83 LME Cu 6775.00 -150.00 -2.17 7375.00 -8.14 LME Lead 1890.00 -50.00 -2.58 2432.00 -22.29 LME Nickel 21090.00 -465.00 -2.16 18525.00 13.85 LME Tin 17500.00 -50.00 -0.28 16950.00 3.24 LME Zinc 1996.00 -59.00 -2.87 2560.00 -22.03 SHFE Alu 14990.00 -660.00 -4.22 17160.00 -12.65 SHFE Cu* 53560.00 -2790.00 -4.95 59900.00 -10.58 SHFE Zin 15970.00 -835.00 -4.97 21195.00 -24.65 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Reporting by Pratima Desai; editing by Sue Thomas)
