Copper fell to a three-week low on Wednesday on mounting concerns that a slowdown in US growth would hurt demand for metals, but supply uncertainty helped limit further falls as a strike at Chile's Escondida mine entered its 13th day. Benchmark copper on the London Metal Exchange was untraded at the close but bid down at $9,530 a tonne from $9,680 on Tuesday. Earlier on Wednesday, the metal used in power and construction earlier touched $9,520 a tonne, its lowest level since July 12.
The latest trigger for losses was weaker services sector data from the United States, which added to fears over the pace of recovery in the world's largest economy and prompted concerns about demand for base metals. "The sentiment has been so negative over the past after disappointing (US) data, so the mood is bearish. The market is macro driven at the moment," said Andrey Kryuchenkov, an analyst at VTB Capital. Agreement by lawmakers on a last-gasp deal to raise the US borrowing capacity and avoid a debt default failed to bring much relief as investors focused on the implications of tighter fiscal policy on US growth.
Supply concerns, however, helped to limit further falls in copper as negotiations between union officials and Escondida mine owner BHP Billiton stretched into a second day on Wednesday. The strike at Escondida, the world's top copper mine, has stoked fears of contagion to other mines, fanning global supply fears, some analysts say. "Some in the copper industry fear that if BHP agrees to demands for a higher bonus at Escondida, workers at other mines in Chile could follow suit with similar demands," ANZ said in a note.
Escondida extracts 7 percent of the world's copper. The possibility of a strike at Indonesia's giant Grasberg copper mine - the world's second-biggest copper deposit by output - intensified as union workers, citing higher pay in Chile, threatened to down tools again if Freeport McMoran fails to increase salaries. "Copper has seen a good support base around $9,600 for the past three weeks, but we think a test and break of that support line is inevitable in the short term. $9,000 is the next obvious line of support in the charts below that and we think any test of that level should be treated as a buying opportunity."
Reflecting soft demand for copper in the summer lull, cancelled warrants - the metal earmarked for delivery - at 2.8 percent of LME stocks of 465,850 tonnes are the lowest since mid-April and have been falling since June 22. Aluminium slipped to $2,524 at the close from $2,583. The metal has been helped by electricity supply concerns for smelters in China's Henan province. Analysts at Harbor Intelligence see some near-term weakness for aluminium but expect further upside to prices towards the end of the year. Zinc, used in galvanising, closed at $2,377 a tonne from $2,440, while battery material lead fell at the close to $2,522 from $2,561. Tin closed lower at $26,300 from $27,250 and nickel fell to $23,805 from $24,800.