Copper hit a fresh four-month low on Tuesday, shrugging off upbeat German growth data which helped lift the euro, as other EU economies contracted and concerns of slower growth in China and a political stalemate in Greece kept prices under check.
Benchmark copper on the London Metal Exchange was at $7,827.50 a tonne by 11:06 SA time, 0.2 percent below its close at $7,385 on Monday. Earlier, the metal used in power and construction hit a session low of $7,763.35 a tonne, its lowest since January 12.
The euro zone narrowly avoided recession in early 2012 but the region's debt crisis sapped the life out of the French and Italian economies and widened a split with paymaster Germany.
The Netherlands and the European Union's emerging eastern states also showed an economic contraction.
The euro rose slightly against the dollar on the back of the upbeat German growth data, although gains could be short-lived as a political stalemate in Greece stoked fears it may renege on bailout pledges and exit the currency bloc, rattling markets.
A weaker US currency makes dollar-priced commodities such as base metals cheaper for holders of other currencies.
“Today it's very much about the macro environment, about political uncertainty in the euro zone,” said Gayle Berry, an analyst at Barclays Capital.
“Investors are also waiting for conclusive data suggesting whether China is turning the corner; for metals a bigger than expected slow down in growth in China is really a main concern.”
China consumes about 40 percent of the global copper supply.
CHINA SLOWDOWN
A slowdown in China is weighing on investor sentiment, with Beijing's weekend move to cut banks' reserves to spur lending seen as an affirmation that the world's No. 2 economy and top copper consumer is weakening further.
But Matt Fusarelli, analyst at Australia-based consultancy AME Group believes China will remain a key support factor for the market.
“We are quite positive on the copper market because so much of it is going into electrification projects in China and these are going to be sources of demand which transcend any pocket of weakness,” he said.
“The world has to get around the idea that China will not continue to grow at double-digit rates every single year. These growth rates are going to slow and that means copper and raw material demand will slow in percentage terms.”
China's copper imports fell nearly 19 percent to an eight-month low in April, while its output of refined copper for the same month fell for the first time since January.
Fundamentally, a sustained premium in LME cash copper over three-month material still points to tightness in immediate supply, which should be supportive of prices. But the backwardation had eased to $60 a tonne from this
year's high of $149 at the end of April, the steepest since August 2008.
Tin was at $20,050, unchanged from its close on Monday while zinc, used to galvanise steel was at $1,921.50 from $1,920.
Battery material lead was at $2,033 from $2,035.50 and aluminium was at $2,022.50 from $2,025.
Nickel was at $17,015 from $16,875. - Reuters