Copper prices fell to their lowest in more than six years on Monday in a sell-off triggered by the attacks in Paris, a stronger dollar and poor demand prospects in top consumer China. Benchmark copper on the London Metal Exchange slid as low as $4,685 a tonne in early trading, matching the low seen in June 2009. The metal used in power and construction closed down 2.8 percent at $4,690.
Risky assets, such as commodities and equities, came under pressure as investors turned to safer assets, such as the dollar, after suspected Islamist militants launched co-ordinated attacks across Paris. "We're struggling to see light at the end of the tunnel, things aren't getting any better in China, we can't see what is going to turn things around for industrial metals," Cantor Fitzgerald analyst Asa Bridle said.
A higher US currency makes dollar-denominated commodities more expensive for non-US firms, a relationship used by funds that buy or sell using signals from mathematical models. Slowing demand growth in China has been a major reason for copper's losses of about 25 percent since the 2015 peak of $6,481 in May.
"Copper has hit the $4,700 somewhat quicker than I thought it might ... there is no reason why $4,400 (an area of congestion from 2009) should be the next level to test," said Malcolm Freeman, a director at Kingdom Futures. The latest signs of weaker Chinese demand come from Chile's Codelco, the world's top copper producer, which has cut its 2016 premium to China for refined metal by more than a quarter to a three-year low of $98 a tonne.
Lower prices have persuaded some large mining companies, such as Freeport McMoRan and Glencore, to scale back production. But the cuts are sufficient, some analysts say. "Ongoing price weakness, in spite of price-related output cuts, is consistent with our view that producers do not move markets into deficit by cutting supply ... rather they move markets closer to balance (than they otherwise would be)," Goldman Sachs said in a note.
"A demand recovery along with further supply discipline is required to see markets such as copper move into deficit." A recent Reuters survey showed analysts expect the global copper market to have a surplus of 349,000 tonnes this year and 177,000 tonnes in 2016. Three-month aluminium fell to $1,465.50 a tonne, its lowest since October 28. The metal used in transport and packaging was last down 1.6 percent at $1,467. Zinc was down 2.1 percent at $1,587, lead slid 0.9 percent to $1,596.5, tin lost 0.3 percent to $14,700 and nickel fell 1.2 percent to $9,310 a tonne.
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