[miningmx.com] –COPPER fell to its lowest in more than a week as investors trimmed positions in riskier assets following weak data and growing sovereign debt troubles.
Fitch Ratings cut Greece’s debt to BBB+ with a negative outlook while Moody’s downgraded six Dubai-linked issuers on Tuesday after concluding that no “meaningful” government support would be provided to top firms such as DP World.
The Greece news sent the euro skidding to a one-month low against the dollar, before it regained some ground in Asian trading, while sterling extended losses ahead of Britain’s pre-budget report.
Adding to the gloom, revised data showed Japan’s economy grew just 0.3% in the third quarter versus an initial growth estimate of 1.2% on slow capital spending.
“The base metals complex is lacking direction for the next convincing break, and in the absence of any significant changes to the fundamentals, the markets are drifting on the back of macro news, concerns about certain sovereign debt position and the dollar as well,” said Yingxi Yu, analyst at Barclays Capital in Singapore.
Copper touched over 14-month highs last week and market players are eyeing a slew of data, including industrial output, consumer prices and urban investment, from top metals consumer China due on Friday, for cues on whether a further pullback is warranted.
Three-month copper on the London Metal Exchange dropped $80 to $6 900 a tonne by 07:03 GMT, stretching losses for a fifth day running.
Shanghai’s benchmark third month copper fell 1 100 yuan to close at 54 500 yuan a tonne. The most active fourth month contract slipped 1 220 yuan to 54 620 yuan.
Despite Wednesday’s decline, copper prices are still up more than 125% this year, driven by Chinese buying, a struggling dollar and investment money betting on a pickup in demand next year.
“I think the market needs a significant correction towards the end of the year. Most investors in China also need to cut long positions,” said a Shanghai-based trader, adding LME copper will find strong buying interest when it drops to around $6 500.
“Most investors are still quite positive on the prospects for next year so the selling pressure into the year-end would be quite limited,” said Barclays’ Yu.
Other base metals also edged lower with three-month LME aluminium down $53 to $2 110 a tonne.
The metal touched a 13-month peak of $2 190 a tonne on Tuesday, buoyed by rising physical premiums in parts of Europe, even as LME inventories stand near record levels at 4.59 million tonnes.
“We believe the global aluminium market is not in a deficit, but the current physical market is tight in some regions because the bulk of LME warehouse inventories are tied up in financing deals and therefore are not readily available,” Barclays’ Yu said.
Another metal bound to see increased availability is nickel after Canada’s First Quantum Minerals said it will buy BHP Billiton’s closed Ravensthorpe nickel mine for $340m, paving the way to revive production that could add nearly 3% to world supply.
