Copper prices fell on Wednesday, with a rally from the previous session dissipating as concerns about the euro zone debt crisis eroded confidence and prompted worries about the demand outlook for industrial metals.
Three-month copper on the London Metal Exchange (LME) slipped to $7,706 a tonne at 11:47 SA time, from a close of $7,790 in the previous session when it hit a three-week high.
The outlook for the market remained shaky due to worries about the euro zone debt crisis, with a round of bond auctions likely to be closely watched by investors.
Germany will sell 5 billion euros of 10-year Bunds, kicking off the new year's debt raising by euro zone sovereigns.
“Worries about the euro zone will be with us for some time to come. The fundamental problems have yet to be solved and at some stage this year the politicians really do need to offer a longer-lasting solution,” said Nic Brown, head of commodity research at Natixis. “It's not clear that any of the measures that have been taken so far are addressing the fiscal problems.”
The downturn in the euro zone's vast private sector economy eased slightly towards the new year thanks to an upturn in Germany, although the region still looks firmly on course for recession, surveys showed on Wednesday.
All eyes will be on a meeting between France's Nicolas Sarkozy and German Chancellor Angela Merkel in Berlin on Jan. 9 for talks that are likely to centre on new rules to enforce budget discipline across the European Union.
Finance ministers from the EU's 27 members will meet on January 23 before their leaders hold a summit a week later.
“No one knows if Europe will blow up. As people come back to the market, the volatility will return,” said Koun-Ken Lee, commodities strategist at Standard Chartered in Singapore.
Copper posted its first annual decline in three years in 2011 when it lost a fifth of its value on fears related to the euro zone debt crisis and the global economic slowdown.
FED FORECASTS
The U.S. Federal Reserve said it would begin publishing forecasts on the path of interest rates later this month, a move that could suggest rates will be on hold for longer than previously expected.
“Clearly investors should not see this as a cast iron guarantee. All this is going to be is the collective wisdom of the various FOMC members and their expectations for where interest rates will be and when the first moves will come,” Brown said.
“In no way does it tie the Fed down to any long-term strategy.”
In industry news, China's large copper smelters and global miner BHP Billiton have settled 2012 term copper concentrate treatment and refining charges at $60 a tonne and 6 US cents a pound, smelter sources said.
Peru's mining ministry said output of copper rose in November from the same month a year earlier, but that production of most metals slipped.
In other metals, aluminium slipped to $2,075 from Tuesday's close of $2,076 a tonne, while zinc fell to $1,875 from $1,878.
Aluminium stocks in LME-registered warehouses rose by 4,425 tonnes to a fresh record high of 4.98 million pounds, data showed.
Soldering metal tin fell to $19,830 from $19,995, while battery material lead slipped to $2,089 from $2,100 a tonne. Nickel fell to $18,775 from Tuesday's close of $18,900. - Reuters