Copper declines

Copper fell on Wednesday as worries about economic growth in the western world and a strong dollar hit sentiment, but expectations of strong demand from top consumer China helped curb further losses. Benchmark copper on the London Metal Exchange was untraded at the close, but bid at $7,250 a tonne, down from $7,594 a tonne at the close on Tuesday.
The metal used in power and construction plunged to a 14-month low of $6,800 a tonne on Monday as panic selling on fears of Greek default and the eurozone crisis accelerated. Markets on Wednesday focused on international auditors heading for Athens to inspect the Greek governments' austerity plan, while a German suggestion that a new bailout may be renegotiated caused much consternation.
Adding pressure to the metals price was a rise in the strength of the dollar against a basket of currencies. A stronger dollar makes commodities priced in the US unit more expensive for holders of other currencies. In a positive sign for demand, China's imports of refined copper surged 21.2 percent to 235,509 tonnes in August compared with the previous month, to reach their highest level since January.
"We have seen China absent from the copper market for large periods of time this year. Since we had this dramatic price fall, we expect to see some restocking happen in China over the next few months," said Caroline Bain, economist at the Economist Intelligence Unit.
China accounts for about 40 percent of global demand estimated at around 19 million tonnes this year, western Europe consumes about 15 percent and the United States 10 percent. The global metals industry gathers next week in London for events organised around the London Metal Exchange's (LME) annual dinner, which takes place on October 4.
Analysts hope then to gauge the robustness of demand and to what extent the financial crisis is feeding through to real economic activity. Traders and analysts think volatility will be a feature of the market until Friday, which marks the end of the month and quarter.
"Window dressing (an attempt to make investments look better) is inevitable and there will be an element of clearing the decks ahead of the fourth quarter," a trader said. "There are a lot of people nursing some quite large losses." Clearing the decks is a reference to position squaring.
Copper is down some 30 percent since hitting a record high of $10,190 a tonne on February 15, as investors piled into the metal on expectations of a supply shortage this year and next. That now looks unlikely. "Commodity markets continue to face immediate challenges," Credit Suisse said in a note. "Given the evident economic slowdown ... the environment looks set to remain difficult. As a result, the tactical outlook for commodities is neutral."
Citigroup warned in a note that unless there was meaningful policy stimulus out of Europe or the United States or a global growth turnaround, commodity markets were unlikely to rally for the time being with any sort of bullish conviction. Three-month aluminium closed at $2,235 a tonne from $2,245 on Tuesday, zinc ended at $1,942 from $1,972 and lead closed at $2,008 from $2,025. Tin ended at $20,550 a tonne from $21,795 and nickel closed at $18,505 a tonne from $18,955.