Industrial metals slid on Tuesday on doubts about a $1-trillion (U.S.) emergency rescue plan to stabilize the euro, and on concerns over the longer-term demand outlook in Europe and in China, the world’s largest consumer.
Copper (HG-FT) for three-month delivery on the London Metal Exchange traded at $6,910 a ton in official rings from a close of $7,120 on Monday when the metal used in power and construction rose $180.
Nickel and lead earlier fell more than 5 per cent, while zinc and aluminum (AL-FT) fell more about 4 per cent and copper fell nearly 3 per cent.
“The markets are being a bit cynical and rightly so,” Alex Heath, head of base metals at London’s RBC Capital Markets, said of the rescue package.
“There is an awful lot of hard work and belt-tightening to be done,” he added. “The markets have factored in a recovery that hasn’t been achieved yet.”
Copper fell to as low as $6,632.75 last week, its weakest since mid February, on concerns that debt problems in Greece could spread to other countries and as equities skidded.
Also pressuring metals, the euro and other major currencies fell against the dollar, making dollar-priced metals costlier for non-U.S. investors.
EYES ON CHINA
In China, output of base metals was strong in April. Copper rose 15 per cent versus a year ago to 380,000 tons while output of aluminum vaulted 57 per cent to 1.37 million tons.
But investors are concerned that demand from China could soften as the world’s top consumer of base metals looks set to take steps to cool its red-hot growth.
“There’s a great concern that China is slowing down and confidence in metals is going to continue to erode as the (northern hemisphere) summer wears on,” Mr. Heath said.
Adding to uncertainty, China signaled that it was ready to let the yuan move more freely when it said it would manage the currency “with reference to a basket of currencies”, a central bank adviser said on Tuesday.
Aluminum traded at $2,056 a ton from $2,144. The metal used in transport and packaging earlier hit a low of $2,055.50.
Zinc was untraded in the rings, but bid at $2,043 from $2,139 and battery material lead at $1,995 from $2,108.
Lead earlier fell to a session low of $1,990.
Tin traded at $17,450 from $17,750 on Monday and nickel at $22,155 from $23,000. Nickel hit a session low of $21,820 a tonne.
“Sentiment is fickle,” Barclays Capital said in a note. “There are still widespread concerns of euro area sovereign debt contagion, which could still undermine prices.”
