Copper hit a three week low on Monday as the euro fell and as investors grew concerned over the outlook for metals demand due to renewed fears that Spain will have to seek a full sovereign bailout.
Also knocking sentiment were worries that Greece may leave the euro, as German magazine “Der Spiegel” reported that the International Monetary Fund may not take part in any additional financing for the country, highlighting growing frustration with Athens.
Spanish bonds yields soared to their highest levels since the euro was created, as Murcia became the second Spanish region to request financial assistance from the government after Valencia, with media reports suggesting six regions could seek aid.
“Out of the LME complex copper has got the strongest fundamentals but how much do fundamentals count when you have the threat of collapse in the euro zone,” said Societe Generale analyst Robin Bhar.
“I can't see anything over the next couple of months to support copper. We don't think quantitative easing is likely (in the US) until early next year. There's more scope for China to relax (monetary policy) but we'll have to wait till later in the year.”
Three-month copper on the London Metal Exchange fell 2.12 percent to $7,387.75 per tonne by 11:55 SA time, having earlier hit a low of $7,367.75, its weakest point since late June. Nickel sank to a three-year low and tin hit its lowest since last September. Lead, zinc and aluminium all reached three-week lows.
Copper has fallen more than 12 percent since the end of the first quarter, dented by slowing growth in top copper consumer China, a shaky recovery in United States and mounting sovereign debt problems in the euro zone.
The latter in particular have weighed heavily on the euro, which reached two year lows versus the dollar earlier, making dollar-priced metals costlier for European investors.
Traders are currently awaiting manufacturing data from China and Europe, due on Tuesday, for further clues on the health of the global economy and its implications for metals demand.
“We are looking out for news of fresh stimulus measures in China and the United States, and concrete measures to deal with Spain's problems,” said an analyst with an international trading firm, although she added that China was unlikely to act in July, as it would be too soon after a recent rate cut.
GRIM
The grim economic backdrop offset an International Copper Study Group report on Friday that said the global refined copper market was in a 384,000-tonne deficit from January to April 2012, up sharply from a 26,000-tonne deficit during the same period of 2011.
The report implied some support from fundamentals for copper prices at current levels, but bearish market sentiment and global economic uncertainties are weighing on the demand outlook and discouraging investors from buying.
In other metals traded, LME nickel dipped as far as $15,450 a tonne, its lowest since July 2009, dragged down by the euro zone worries as well as weak global demand for its most important downstream product, stainless steel.
It was later quoted down 2.19 percent at $15,601 a tonne.
Tin fell 3.14 percent to $18,335 a tonne, having earlier fallen nearly 5 percent to hit its lowest since last September at $18,011, as traders
took profits on a metal that has this year been the top performer after zinc and copper.
Battery material lead fell 2.01 percent to $1,862.75 a tonne, having earlier hit its lowest since early July at $1,851 a tonne. Latest data showed LME stocks fell by 1,975 tonnes to hit their lowest since September last year, having retreated 13 percent from record peaks in October.
Aluminium fell 1.17 percent to $1,872.75 a tonne, having earlier hit its lowest since late June at $1,864 a tonne. LME stocks were up by 18,075 tonnes to 4.85 million tonnes, but with aluminium for September delivery trading at a premium of around $4 a tonne over October, despite the nominal stock oversupply.
Zinc, used in galvanizing, fell 1.63 percent to $1,809 a tonne, having earlier hit its lowest since late June at $1,804.75 a tonne. - Reuters
