Copper slipped on Friday, as euro zone sovereign debt worries and a firm dollar dragged industrial metals lower, while concerns of possible fiscal tightening by number one metals consumer China added to negative sentiment.
Benchmark copper for three-month delivery on the London Metal Exchange traded at $6,986 a tonne in official rings from $7,160 at the close on Thursday.
Copper, used in power and construction, hit a session low at $6,960, but was still shy of $6,632.75 touched last week — its lowest since mid-February.
"The big factor is the currencies," said Robin Bhar, an analyst at Credit Agricole. "People are convinced that the problems aren't over.
"Fears of (debt problem) contagion have been contained but now we're looking at some of the wider implications of measures taken … Investors are seeing very few areas in which to invest with certainty."
Despite a $1 trillion rescue package to prevent a Greek debt crisis from spreading to other euro zone states, investors continue to be concerned about future growth and metals demand.
Spain and Portugal have joined Greece in taking steps to cut their budget deficits, offering some reassurance to markets.
The euro hit a fresh 18-month low against the dollar, as concerns intensified that fiscal austerity measures in the euro zone would dampen a fragile recovery.
A weak euro makes metals pricier for European investors.
Metals investors are also fretting over how China, the world's number one metals consumer, may try to curb inflation and cool its economy.
Data this week showed Chinese inflation edged up to an 18-month high in April.
"There are fears that the introduction of further restrictive monetary measures in China might be imminent, after the country published very strong economic data at the beginning of the week," Commerzbank said in a note.
"This revealed the necessity of having to cool the local economy in order to prevent the formation of a bubble," Commerzbank added. "Under normal circumstances, therefore, no major upwards jumps in prices of base metals should be expected."
STOCKS OFFER DEMAND HOPE
Helping cap losses however, were falls across the complex in LME inventories — a possible signal of improving demand.
Copper stocks fell 1,075 tonnes to total 484,075 tonnes while cancelled warrants – material set to leave warehouses – were at 18,450 tonnes from 15,550 on May 10.
Cancelled warrants in zinc were at 24,100 tonnes, up from 6,050 tonnes on May 4 but despite a 1,050 tonnes fall in stocks, they remain near their highest level since August 2005.
"Activity from the manufacturing sector has been accelerating," said Bhar. "The fundamentals are pretty good."
Zinc was untraded but last bid at $2,087 a tonne in LME rings from $2,160 while aluminium traded at $2,107 versus $2,170. LME stocks for aluminium, used in transport and packaging, fell 3,725 tonnes to remain near record levels at 4.47 million tonnes.
Russia's United Company RUSAL, the world's top aluminium producer, said on Friday it expects aluminium prices to remain above $2,000 per tonne for the rest of the year.
Steel making ingredient nickel was untraded in exchange rings but last bid at $22,175 from $22,850, tin was bid at $17,575 from $17,800, while battery material lead was traded at $1,980.50 from $2,060.
