Copper fell almost 3 percent on Wednesday as worries increased among investors that credit rating agencies might downgrade European countries as EU leaders have so far been unable to tackle a debt crisis which is denting metals demand prospects.
Risk aversion also pushed up the US dollar, generally perceived as a safe-haven asset, putting more pressure on industrial metals prices.
Benchmark tin on the London Metal Exchange fell almost 5 percent to a session low of $18,600 a tonne, its lowest since late September, and aluminium fell almost 2 percent to a low of $1,969, its weakest since late July 2010.
Copper fell almost 3 percent to trade at $7,370 a tonne in official rings, the weakest since Nov. 30, down from a close at $7,600 a tonne on Tuesday.
The metal used in power and construction has lost almost a fourth of its value so far this year, after gaining for the last two years.
“The market remains substantially sceptical after the EU leaders' manoeuvre last Friday and it is still unclear whether the rating agencies will downgrade European countries and this is putting some pressure on metals,” said Gianclaudio Torlizzi, a partner at metals consultancy T-Commodity.
“However this price drop offers a good buying opportunity. This price level is very interesting for a short-term trade. What can cap prices though is the uncertain exchange rate,” Torlizzi said.
Downgrades worries also made the euro slide to an 11-month low against the dollar. A stronger US currency makes dollar-priced commodities such as base metals costlier for holders of other units.
“The euro is taking a beating again and this is affecting copper; the outlook is negative at the moment “ said an LME ring broker.
The US federal reserve also disappointed some market expectations as it gave no hints of new stimulus measures to offset the economic crisis on Thursday, at its final policy meeting of the year.
RISING IMPORTS
Freeport Indonesia confirmed it has agreed a pay deal with workers at its Grasberg mine that ends a three-month dispute that has paralysed output at the world's second-biggest copper mine.
Nonetheless, copper production has been heavily disrupted this year by long strikes at some of the biggest mines including Freeport's mines in Indonesia and Peru.
“On the fundamental side, the news flow has remained supportive,” Credit Suisse said in a research note.
“Inventories are falling in most markets and Chinese imports are accelerating. However, the fundamental data currently takes a backseat. Given the challenging financial market environment, we think that it is too early to buy industrial metals.”
Physical buyers in China were attracted by lower copper prices in November, when Chinese imports reached their highest level since March, preliminary data from China's General Administration of Customs showed on Saturday.
Underlining increased physical demand, inventories of copper in LME-monitored warehouses fell to 382,150 tonnes, their lowest since the end of January, latest data showed.
Inventories of aluminium, on the other hand, rose to a record 4.8 million tonnes and are likely to breach the 5 million tonnes level in the next few days as a souring economic outlook curbed demand and a European dollar crunch intensified the need for cash ahead of the year end.
This however might be counterbalanced by an Asian import rise.
China's primary aluminium imports are likely to rise until March with investors and merchants ramping up purchases after an arbitrage window between the LME and Shanghai opened for the first time since 2009, traders said.
Aluminium traded at $1,974 in official rings from a $2,000 close on Tuesday. Zinc, used to galvanise steel, was untraded in rings but was bid at $1,868.50 from a $1,912 close and battery material lead traded at $2,036 from $2,085.
Tin changed hands at $18,775 from a last bid of $19,500 and stainless steel ingredient nickel at $17,805 from a last bid of $18,300. - Reuters