Copper falls on demand concerns, Greek debt weighs

Copper fell on Monday as investors lost their appetite for risk on concerns over metals demand and after European finance ministers postponed an emergency loan to help Greece avoid defaulting. Three-month copper on the London Metal Exchange ended at $9,005 a tonne, after closing up 0.3 percent at $9,095 on Friday.
"Continued concerns about Greece are affecting the market," RBC trader Randy North said. In the eurozone, finance ministers applied intense pressure on Greece, saying it had to approve stricter austerity measures before the final decision is made on a further 12 billion euros ($17 billion) in loans. "The market is also feeling the effects of the (Japan's) earthquake on industrial production decline," North said.
"Automotive and electronics factories are just restarting (in Japan) and it is going to take a little bit of time before metals consumption goes back to previous levels." Japanese factories produce and export key components for the automotive and manufacturing industries. The March earthquake and tsunami caused supply disruption in Japan that affected industrial production world-wide. In this climate, people are taking money off the table, North said.
"We need to see copper go down to mid-$8,000 levels again to see some more buying." China's credit tightening measures, aimed at calming inflation, were also clouding the outlook for metals demand. Nickel closed at $21,650 a tonne from $21,675. It hit a session low of $21,337 a tonne, its weakest since November last year. The price of the metal, used to make stainless steel, is down by about 27 percent from the year's highs reached in February.
"At these levels nickel is looking oversold," Barclays Capital analyst Gayle Berry said. "From a fundamental perspective we don't see any reason why nickel has underperformed to this extent." "LME inventories are falling yet prices have been very weak. I think the market is pricing in expectations of a better outlook for supply in the second half of the year."
Nickel inventories in LME-monitored warehouses fell by 516 tonnes to 110,880 tonnes and are down nearly 20 percent since the start of the year to a near two-year trough, data on Monday showed. The International Nickel Study Group said in April it expected the nickel market to record a 60,000-tonne surplus this year, compared with a deficit of 30,000 tonnes in 2010.
"We believe that demand growth should at least partially absorb additional supplies, particularly once the Japanese steel industry recovers again," Credit Suisse said in a research note. Lead inventories in LME-monitored warehouses fell by 125 tonnes to 322,575 tonnes, data showed on Monday, but are still within spitting distance of 16-year highs. Lead closed at $2,450, unchanged from the close on Friday. Aluminium finished at $2,531 per tonne from $2,545 and tin at $24,800 from $25,005. Zinc ended at $2,172 from $2,187.