Copper slipped in choppy trade on Friday, pressured by a strong dollar, with the metal on track for a fourth week of losses on concerns about the outlook for demand as the eurozone debt crisis deepened. Three-month copper on the London Metal Exchange ended at $7,230 a tonne, down from a last bid of $7,265 a tonne on Thursday.
LME copper lost around 4 percent this week and touched a one-month low of $7,100.25 on Thursday. "There has been some positioning ahead of the weekend and US equities have turned north on the open. But you have to say the path of least resistance has to be lower," Robin Bhar, analyst at Credit Agricole said. "We have been trading in a range, but if we drop below $7,000 we are likely to see some good buying from Asia."
US shares opened higher, helped by a buoyant start to the holiday shopping season, but the euro slid to a more than seven-week low against the US dollar and was set to weaken further as a disappointing Italian debt auction stoked fears the eurozone crisis was deepening.
"What is going on pretty much in every part of the world is not good," Natixis analyst Nic Brown said. "In Europe, the ongoing political crisis is feeding through into a significant tightening of credit, and that negative effect is a clear economic shock. The United States is going through another bout of political shenanigans."
Four consecutive weeks of falls in copper have wiped close to 9 percent off the price of copper in the month to date. It is trading around 24 percent lower on the year. Highlighting the deepening debt crisis in the eurozone, Italy paid a record 6.5 percent to borrow money over six months on Friday and its longer-term funding costs soared far above levels seen as sustainable for public finances.
In the United States, lawmakers have abandoned a high-profile effort to rein in the country's ballooning debt, cementing perceptions that Republicans and Democrats are too divided to tackle the country's biggest problems. But demand for copper remains solid, analysts said, supported by supply constraints, an expected deficit of the metal, and destocking of the metal out of warehouses. While analysts trimmed their copper demand growth forecasts, they still expect it to grow by 4 percent this year, to 19.9 million tonnes.
The International Copper Study Group (ICSG) said this week world refined copper market was in deficit of 161,000 tonnes in the first eight months of the year, although that's narrower than a deficit of 339,000 tonnes in the same period last year. Latest data shows inventories of the metal held in LME-monitored warehouses fell to 394,725 tonnes, the lowest since early February. Aluminium stocks also fell, by 2,625 tonnes to 4.56 million tonnes. Macquarie said in a research note China's apparent consumption of all major bulk commodities and base metals increased on a year-on-year basis in October.
In copper and aluminium, apparent consumption of semi-finished products continued to rise at a faster rate than apparent consumption of refined metal. "The data continue to suggest de-stocking of copper and aluminium along the supply chain as a whole," it said. "This is consistent with feedback from our market sources and, of course, pressure and incentives to reduce inventory and release working capital in a credit-constrained and falling price environment."
Three-month aluminium ended at $1,993 a tonne from a last bid of $2,018.15. The price has been hovering close to its lowest since July last year of $1,982.25. "Aluminium is demonstrating the worst fundamentals at the minute," Brown said. "In the here and now with what's going on in the financing side, aluminium is more vulnerable than other metals."
Financing deals are said to have tied up about 70 percent of the stocks in LME-monitored warehouse. Traders have said more than 1 million tonnes of global aluminium stocks are expected to be released from financing deals as credit tightens. "We're wondering if the problems in Europe mean that financing is becoming more difficult for all the outstanding positions that have been out there in the warehouse world," Brown said.
Reflecting tight credit conditions, an executive at UK-based trading house Stemcor told Reuters metals trading companies face increasing funding costs and counterparty risk as the banks' funding crisis threatens to spread to the industrial sector. In other metals, tin closed at $20,700 from $20,350 and battery material lead ended at $2,004 from $1,992. Zinc closed at $1,910 from $1,888. Nickel was untraded at the close, but bid at $16,950, down from a close of $17,075 on Thursday.