Copper hit a three-month low on Monday as the dollar rallied after the collapse of talks to avert a Greek debt default and as a seasonal demand slowdown in top copper user China hurt sentiment. The dollar rose against basket of a currencies while global equities fell after the Greek talks foundered at the weekend. A strong dollar makes dollar-priced metals costlier for non-US investors.
Benchmark three-month copper on the London Metal Exchange ended down 1.5 percent at $5,825 a tonne, having earlier hit its weakest since mid-March at $5,777. The metal is heading for a fifth consecutive week of falls. Among other metals, aluminium slumped to its lowest since February last year at $1,693 a tonne, while zinc, lead and tin all fell to their weakest since April.
"Over the past 1-1/2 weeks any weakness (in the dollar) has done nothing for metals whereas strength has pushed them lower, suggesting there are wider concerns about fundamentals," said Nic Brown, head of commodities research at Natixis. He was more positive on copper's forward prospects, saying: "We expect copper prices to rise over the second half. The supply side is significantly weaker than we thought it would be and ... end-user consumption (in China) remains robust." Limiting losses for copper was news that unionised workers at Chile's Collahuasi mine downed tools for a 24-hour strike.
Yet many investors increasingly expect copper prices to fall. Hedge funds and money managers switched to a net short position in the week to June 9, US data showed. Justin Lennon, of Mitsui Bussan Commodities USA, said Monday's price action has put copper in sight of January's 5-1/2 year lows. "There hasn't been a terrific amount of support on the physical side, Western world speculators don't seem interested and the Chinese seem to be shorting (copper)."
Aluminium ended down 1.3 percent at $1,717 a tonne. "Producers are coming under increasing pressure because physical premiums have decreased sharply. Unless producers are granted state subsidies as they are in China, cuts in production appear inevitable," Commerzbank said in a note. The bank added that production cuts would not necessarily reduce global oversupply as China continues to produce record amounts of aluminium.
LME zinc could come under pressure in the near term, with no decent chart support before $2,000 after key support was broken last week, broker Triland said in a note. Zinc closed down 0.8 percent at $2,105 a tonne, nickel slid 1.3 percent to $12,950, lead dropped 2.1 percent to $1,822.50 and tin fell 0.3 percent to $14,800.