Markets

Copper slips on euro zone debt fears, dollar

LONDON : Copper slipped on Wednesday as growing unease about the threat of contagion from the euro zone debt crisis and

Published September 14, 2011 Updated September 14, 2011 11:43am

3 min

By Imad Uddin

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Benchmark copper on the London Metal Exchange slipped to $8,692.75 a tonne by 0950 GMT, down from a close of $8,780 a tonne on Tuesday.

In a sign of a deepening euro zone crisis, Moody's cut the credit rating of French banks Credit Agricole and Societe Generale citing exposure to Greek debt, while China and the United States urged Europe's leaders to prevent the euro area debt mess -- now threatening Italy -- from spreading.

Adding pressure to base metals was a rebound in the dollar. A strong dollar makes commodities prices in the US unit more expensive for holders of other currencies.

"At the moment we're mostly macro driven. If there is a risk of sovereign default in the euro zone, metals will come off with the broader market," said Andrey Kryuchenkov, analyst at VTB Capital.

Global markets have been roiled since the end of July by the twin fears of renewed recession in the United States and Europe's protracted debt woes, which have seen Greece, Ireland and Portugal forced to take bailouts and piled bond market pressure on Italy and Spain.

Greek, German and French leaders are due to hold a conference call at 1600 GMT on Wednesday, which is expected to show that European leaders are working together to solve Greece's debt problems and calm markets in the short term.

Copper prices fell 5.6 percent in August, their biggest monthly drop since June 2010, and is down 6.4 percent so far this month.

"We have had enough downside and there could be some pickup in demand. The Chinese will have to restock," Kryuchenkov said.

China accounts for nearly 40 percent of global copper demand estimated this year at around 19 million tonnes. The United States accounts for about 10 percent of global consumption.

STRIKE THREATS

Industrial action helped limit further falls in copper prices, with workers at Peru's No. 3 copper producer Cerro Verde , controlled by Freeport McMoran , saying they will go ahead with an indefinite pay strike starting on Wednesday after talks with the government broke down.

Workers at Freeport's Grasberg mine in Indonesia have given the company a deadline of midnight on Wednesday to come up with a fresh pay rise offer, or they will proceed with a month-long strike.

"The Grasberg mine in Indonesia and the Cerro Verde mine in Peru, two of the world's largest copper mines, are both affected by strikes starting today. The supply situation on the global copper market... should therefore intensify, which should support the price of copper in the medium term," Commerzbank analysts said in a note.

Among other industrial metals, aluminium slipped to $2,361 a tonne. It was untraded at the close on Tuesday but bid at $2,369 a tonne.

Data from the London Metal Exchange (LME) showed aluminium stocks in LME-monitored warehouses dropped by 5,700 tonnes, with large outflows seen from Malaysian warehouses in Johor and Klang.

Nickel slipped to $21,117 from $21,300 a tonne on Tuesday. Tightness in the nickel market was reflected in a narrowing contango, with the discount for cash against three months at -$12 from -$43 early this month, its narrowest since the start of June.

Zinc edged down to $2,165.25 a tonne from a close of $2,193 on Tuesday, while lead fell to $2,360 from $2,385. Tin traded at $23,250 from Tuesday's close of $23,650 Metal Prices at 0950 GMT.

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