Copper slides, focus on oversupply, weak demand and dollar

Copper prices fell on Wednesday as worries about an oversupplied market and weak demand growth from top consumer China were reinforced by a stronger dollar. Benchmark copper on the London Metal Exchange ended down 1.3 percent at $4,549 a tonne. The metal used in power and construction plunged to $4,443.50 on Monday, its lowest in more than six years.
A higher US currency makes dollar-denominated commodities more expensive for non-US firms, a relationship used by funds to buy or sell copper.
An economic and manufacturing slowdown in China, which accounts for about half of global copper consumption estimated at around 23 million tonnes, has seen demand growth rates slide this year.
"The other problem is an unwillingness by producers, even junior producers, to cut output," said Oliver Fry, a portfolio manager at Ebullio Capital Management.
"Producers are streamlining production and cutting costs rather than cutting output."
Analysts estimate about 20 percent of copper output is loss-making because producers expecting prices to bounce are unwilling to cut, preferring instead to cut costs.
Traders also say Chinese consumers are reluctant to commit to long-term contracts despite Chile's Codelco, the world's top copper producer, slashing its 2016 premium to China for refined metal by more than a quarter to a three-year low of $98 a tonne.
Premiums are surcharges paid over the LME cash price for spot physical metal.
Three-month nickel gained nearly six percent on talk that Chinese nickel producers will on Friday discuss output cuts to support prices, which fell to $8,145 a tonne, their lowest since 2003.
It closed up 1.5 to $8,910. Nickel and aluminium prices got a boost from news that Chinese producers have asked Beijing to buy surplus metal.
But traders said government purchases would only postpone the output cuts needed to reduce supplies and would be bearish.
A refusal could actually be bullish as it could force cutbacks.
Bearish sentiment towards nickel can be seen in data from Marex Spectron. "The nickel speculative short rose from 32,000 lots last week to 37,300 lots or 29 percent of open interest," it said. One nickel lot is six tonnes.
Aluminium gained one percent to $1,460 a tonne, zinc lost 0.2 percent to $1,578, lead rose 0.5 percent to $1,615 and tin rose 2.2 percent to $14,745.