NEW YORK/LONDON: Copper slipped in heavier-than-usual volumes on Monday, as investors sold into the highly anticipated Greek parliament's passage of austerity measures and dragged prices of the industrial metal further away from last week's multi-month highs.
The selling eroded overnight gains in Asia and gathered pace as the day wore on, spurring a more cautious tone in the market following its surprisingly strong 12-percent rally at the start of the year. Stiff overhead resistance at around the $4 per lb ($8,800 per tonne) level will likely remain intact without a stronger market presence from the world's biggest buyer, China, analysts said.
"Most markets are still overextended and may be entering a "buy the rumor, sell the news" type of mode now that the Greek issue is entering its final stages," said Edward Meir, metals analyst at INTL FCStone.
"We likely will work slightly lower from here, as market focus reverts to the Chinese situation and growing evidence of slowing demand."
London Metal Exchange (LME) benchmark three-month copper fell $60 to finish at $8,425 per tonne, down nearly 4 percent from last week's five-month peak at $8,765.
In New York, the key March COMEX contract settled with a 2.25-cent loss at $3.8395 per lb, near the bottom of its $3.8160 to $3.9080 session range.
Volumes jumped over 50 percent from their 30-day average, tipping 89,000 lots in late New York business.
Copper initially spiked higher after Greek lawmakers on Sunday backed sweeping budget cuts in exchange for a 130 billion euro bailout from the European Union and the International Monetary Fund.
But concerns about whether the nearly-bankrupt country will be able to fulfill its tough austerity promises sparked some broader market worry, driving further bouts of profit taking in copper.
"Avoiding default is positive, it's breathing space, but this issue is going to keep on arising every time Greece has to roll over its debt, Greece is essentially verging on bankruptcy," said Citigroup analyst David Wilson.
"There's still a sense that the copper rally has been overdone. China hasn't been buying, total global exchange stocks have actually risen since the beginning of December and Chinese premiums have been softening over the last month and a half."
Shanghai copper stocks have shot up since early December to 1.5-year highs, making the drawdown in LME copper stocks to 2.5-year lows look a lot less bullish.
Also, the ShFE copper futures curve signals a lack of spot appetite for the metal, with front-month prices trading well below third-month prices since early January, having traded at a premium for most of the second half last year.
QUICK RALLY
"This quick rally of copper on the LME over the past months has overshot fundamentals and there could be a risk of price correction from this level by around 8 to 10 percent before the Chinese come back," Macquarie analysts said in a note.
"We need a lower copper price to incentivize Chinese buying or a significant pick-up of the construction market from recent lows, which seems unlikely in the near term."
Some US fund managers, however, continued to buy copper. Money managers in gold, silver and copper futures and options raised their net long positions in the week of Feb. 7 as investor interest in the three metals continued to recover after a recent disappointing performance.
In other metals, aluminium ended down $32 at $2,211 a tonne after LME stockpiles increased by 36,825 tonnes to a new record of 5.064 million tonnes.
Top aluminium producer RUSAL Plc said on Monday it expected more companies to cut aluminium output this year, with China accounting for about a third of global cuts, but still forecast that global output would top demand.
Excess capacity in aluminium smelting will drag on for years to come, even while losses weigh on producers, as political pressures in China and Russia to keep jobs and push self-sufficiency prevent or delay plant closures.
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