Wed Nov 9, 2011 2:08pm EST
* Copper, base metals pressured by European debt anxiety
* Freeport union may extend strike to third month
* Coming up: China October trade balance data Thursday
By Chris Kelly and Melanie Burton
NEW YORK/LONDON, Nov 9 (Reuters) - Copper slumped to a
two-week low Wednesday as the dollar rallied and the cost of
Italian bonds soared to dangerously high levels, underscoring
weaker global growth prospects and fears of curbed metals demand.
Selling momentum enveloped the wider industrials complex,
dragging zinc down over 3 percent, lead over 2
percent, tin nearly 1 percent and nickel 3.5
percent.
Copper extended losses into a fourth straight day, falling
alongside a 2 percent plunge in equities, as investors feared
Italy, the euro zone's third largest economy, could be facing a
debt crisis similar to that of Greece.
Losses held in after-hours business after euro zone officials
said there were no plans for a financial rescue of Italy, even
though the country's borrowing costs jumped sharply to levels
deemed unsustainable.
"That rattled a lot of investors. The thought here is that
those rates could go even higher. That will continue to support
the dollar and put pressure on a lot of the industrials," said
Michael Gross, futures analyst with Optionsellers.com in Tampa,
Florida.
London Metal Exchange (LME) three-month copper fell to
a session low of $7,580 a tonne, its cheapest since Oct. 26,
before ending the day down $179 at $7,621.
In New York, the key December COMEX contract shed 9.20
cents, or 2.6 percent, to settle at $3.4410 per lb, after dealing
from its own two-week low at $3.4215 to $3.60.
Futures volumes picked up a bit as the selling gripped the
market. More than 58,000 lots exchanged hands late in New York,
closer in line with the 30-day norm, and above thinner trading
volumes earlier this week, according to Thomson Reuters
preliminary data.
While European economic headwinds continue to buffet the
region's demand estimates for metals, there have been signs of
growing pressure on copper supplies in China.
"There are ... indications that metals demand in Europe is
slowing, with metal-consuming companies trying to keep their
on-site inventories as low as possible," said Credit Suisse
Private Banking in a note.
"At the same time, demand in Asia looks strong. In the current
uncertain environment, sideways trading has to be taken as a good
sign ... The next one to two weeks will show whether these
supports will hold. If they do, we could see some recovery toward
year-end."CHINA INFLATION
In a sign that China's economy is in for a soft landing this
year, the country's annual inflation rate fell to 5.5 percent in
October, a third straight month of decline from July's three-year
peak.
Premier Wen Jiabao said prices had fallen further since,
fueling market confidence that the government was gaining control
over inflation and will likely back off from more tightening.
Also supportive for metals prices, union workers at Freeport
Indonesia's Grasberg copper mine said on Wednesday they could
extend their strike by another month, which would make it the
longest mining stoppage in the country's history.
As a result of low production and processing rates, the firm
has suggested it might not achieve fourth-quarter production and
sales targets and the government had said the mine was producing
copper, gold and silver ore at just 5 percent of capacity.
China's production of refined copper fell to its lowest level
in five months in October -- its second decline in as many months
-- due to a shortage of raw materials copper concentrate and
scrap.
On the LME, a senior trader at a ring dealing member said that
trader interest has been light this week, as customers remained
focused on fallout from failed broker dealer MF Global and are
still waiting for positions to be transferred.
"There's nothing gone through, as far as client positions,
yet. Requests have been in there for over a week now, and still
people are waiting. It's not been handled very well," he said.
Metal Prices at 1837 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in
yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
move
COMEX Cu 343.80 -9.50 -2.69 444.70 -22.69
LME Alum 2124.00 -17.00 -0.79 2470.00 -14.01
LME Cu 7625.00 -175.00 -2.24 9600.00 -20.57
LME Lead 1978.00 -43.00 -2.13 2550.00 -22.43
LME Nickel 18050.00 -650.00 -3.48 24750.00 -27.07
LME Tin 22000.00 -205.00 -0.92 26900.00 -18.22
LME Zinc 1933.00 -63.00 -3.16 2454.00 -21.23
SHFE Alu 16280.00 45.00 +0.28 16840.00 -3.33
SHFE Cu* 57970.00 130.00 +0.22 71850.00 -19.32
SHFE Zin 15455.00 130.00 +0.85 19475.00 -20.64
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
