Copper fell more than three percent on Tuesday on worries about the impact on the global economy of a new eurozone crisis and an unexpected slowdown in factory activity in top metals consumer China but an improvement in new manufacturing orders in the US helped temper losses.
Investors rushed to put their money into safer assets after Greece's shock decision to hold a referendum on its eurozone bail-out package, hitting stocks and the euro. Some fear the Greek move could upend a European bailout plan to contain the sovereign debt crisis ahead of a Group of 20 Summit this week.
"It's the G-20 summit at the end of the week, and people want more details. We still need to get the blueprint on how (European leaders) will boost the stability fund," analyst Andrey Kryuchenkov of VTB Capital said. Three-month copper on the London Metal Exchange closed down 3.4 percent at $7,730 a tonne. It lost 2.3 percent in the previous session. Aluminium, zinc, nickel and lead also all fell more than four percent as investors derisked. US stocks tumbled more than 2 percent on Tuesday.
"The Chinese number provided negative impetus ...Being very cyclical, industrial metals will remain vulnerable to any negative surprise in economic data. Thus, a cautious near-term stance is warranted, in our view," Credit Suisse said in a note. Adding to worries about companies' exposure to the eurozone crisis, futures brokerage MF Global Holdings Ltd filed for bankruptcy protection after bad bets on eurozone debt.
However, the impact of MF Global's bankruptcy filing, while an added negative, was minimal, one trader said. On Monday, London clearing house LCH.Clearnet declared MF Global in default, and the LME suspended the brokerage from trading. Limiting copper's losses, Freeport-McMoRan Copper & Gold Inc said on Tuesday that production and processing rates at its strike-hit Grasberg nine in Indonesia have fallen below levels needed to meet fourth-quarter sales targets.
Also helping the metal was data showing copper inventories fell for the ninth session in a row. At 424,750 tonnes, stocks are the lowest since early March and down more than 10 percent over the past month. Tin stocks fell by 325 tonnes to a 2011 low of 16,120 tonnes, but the pace of new orders or net cancelled warrants is dropping off, suggesting tempered appetite.
Three-month tin was not traded in final rings but was bid at $21,750 per tonne from $22,000 at the close on Monday. Zinc closed at $1,913 a tonne, down by $109 or 4.3 percent from $2,000, lead ended down 4.8 percent at $1,982 from $2,082, aluminium down 4.9 percent at $2,111 from $2,220. Three-month nickel finished down almost five percent at $18,600 from $19,575.