Copper slips on euro zone crisis concerns

LONDON: Copper slipped on Tuesday prompted by concerns about the debt crisis in the euro zone, with uncertainty prevailing ahead of the outcome of a vote by Slovakia to approve new powers of the euro zone rescue fund.

Benchmark copper on the London Metal Exchange (LME) fell to $7,268 a tonne by 0904 GMT, down from Monday's close of $7,495 a tonne.

Sentiment was fragile ahead of a vote in Slovakia to ratify the expansion of the euro zone rescue fund, aimed at preventing the Greek debt crisis from spiralling out of control.

One small party in Slovak Prime Minister Iveta Radicova's governing coalition opposes expanding the fund, which requires the unanimous consent of all euro zone.

"It is disappointing that despite the crisis going on for months, euro zone policymakers have failed to find a solution to the crisis. The longer it goes on for, the more difficult it is to see any sustainable rally in prices," Commerzbank analyst Eugen Weinberg said.

Also putting pressure on prices was a rise in the dollar, which reversed earlier weakness to gain against a basket of currencies. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.

With the outlook for global economic growth looking murky, investors worry that the demand for metals such as copper, which is used in power and construction, will take a hit.

Copper prices have fallen 30 percent since hitting a record high of $10,190 a tonne on February 15, and are trading around 24 percent lower in the year to date.

Market participants are expected to scrutinise the figures for signs of any economic slowdown in China, the world's fastest growing economy and biggest consumer of metals.

"Despite China's return from holidays, buying was reportedly muted as Chinese merchants also remained cautious," ANZ said in a note, adding that investors are likely to wait-and-see whether European policymakers are able to deliver viable plans to overcome the region's debt crisis.

ALCOA EYED

In other metals, aluminium slipped to $2,235 a tonne. It was untraded at the close on Monday, but was bid at $2,258 a tonne.

Aluminium producer Alcoa kicks off the third-quarter US earnings season after markets close on Tuesday.

Worries about the euro zone debt crisis, and concerns about demand from top consumer China have put pressure on the outlook for the company. Its results are expected to reflect a weakened economy, with demand for aluminum strong in some sectors such as aerospace but weak in others like construction.

Lead was at $1,965 a tonne from Monday's close of $2,005 a tonne, while zinc fell to $1,916 from $1,950 a tonne on Monday.

Tin was at $22,410 a tonne from a close of $23,050 on Monday and nickel traded at $18,910 a tonne from $19,375 on Monday.

Copyright Reuters, 2011