May 23, 2012 / 10:14 AM / 8 years ago

METALS-Copper sinks to multi-month lows on Greek exit fear

* Copper dragged down in widespread sell-off of risk assets
    * Aluminium dips below $2,000/T for first time since Dec.
    * Coming up: HSBC/Markit Flash China Manufacturing PMI Thurs.

    By Chris Kelly and Harpreet Bhal	
    NEW YORK/LONDON, May 23 (Reuters) - Copper fell on Wednesday in London to a
4-1/2-month low and sank to a fresh 2012 trough in New York, hit hard by a
frenzy of risk-averse selling tied to global growth concerns and worries about
Greece's possible exit from the euro zone.	
    Down nearly 3 percent on the day, copper lead a broad-based decline across
the base metals complex with both lead and zinc losing nearly 2 percent of their
value and aluminium dipping below the psychological $2,000-per-tonne level for
the first time since December.	
    Losses in the economically-sensitive industrial metals kicked into gear
ahead of a European Union summit, when news broke that European officials came
to an agreement that each euro-zone country must prepare an individual
contingency plan in the event that Greece decides to leave the single currency
    "This is panic selling. Everyone is watching this EU summit and wondering
what's going to happen to Greece," said Matthew Zeman, head of trading with
Kingsview Financial in Chicago.	
    "Everyone is just dumping risk assets right and left."	
    London Metal Exchange (LME) three-month copper fell as far as $7,503
a tonne, its cheapest since early January, before ending the day with a $208
loss at $7,531.	
    In New York, the COMEX July contract plumbed a new low dating back to
late December, at $3.3865 per lb, before ending to session down 9.10 cents or
2.6 percent at $3.3960. It was the contract's largest one-day slide since April
4, when it collapsed by more than 3 percent.	
    COMEX volumes picked up with more than 70,000 lots traded late in New York,
down just 10 percent from the 30-day average, according to preliminary Thomson
Reuters data.	
    Copper prices are trading more than 10 percent lower so far this month as
doubts about the ability of European leaders to tackle the region's debt crisis,
coupled with China's intentional growth slowdown and a fragile U.S. recovery,
have left little reason for investors to buy the metal.	
    An informal European leaders summit later on Wednesday is expected to
discuss growth-boosting measures and the idea of a joint euro zone bond.
    But while new French President Francois Hollande supports the proposal for a
joint euro zone bond, Germany's long-standing opposition is unlikely to change,
raising the risk of political deadlock in the euro zone.	
    "There is risk aversion in the market and all eyes are on the summit where
the rift between France and Germany seems to be widening," Andrey Kryuchenkov,
an analyst at VTB said. 	
    "People are piling into the U.S. dollar and that is putting pressure on base
metals. Copper is looking to the downside."	
    Investors are also concerned about sluggish demand from China, which
accounts for 40 percent of global copper demand, and where buying has been slow
to pick up so far this year.	
    "There are more reasons to stay wary than to cheer. All signs point to
Chinese copper demand being sluggish, with downstream orders still weak. China's
economy is slowing, the euro zone crisis remains an issue, while a U.S. recovery
is still uncertain," said CIFCO analyst Zhou Jie.	
    Even as the world looks to China for support there is little sign that
Beijing - faced with its own problems of inflation and high levels of local
government debt - is ready to combat slowing growth with aggressive policies.   	
    The World Bank cut its economic growth forecast for China this year to 8.2
percent on Wednesday and urged the country to rely on easier fiscal policy that
boosts consumption rather than state investment to lift activity.
    The latest data showed copper stocks in LME-registered warehouses rose by
1,725 tonnes to 225,700, with net inflows mostly into warehouses in South Korea,
where traders suspect Chinese merchants have booked around 110,000 tonnes for
     Metals warehouses in China are said to be so full that workers are starting
to stockpile iron ore in granaries and copper in car parks. 	
    "We know that Chinese bonded warehouse stocks are near record highs and when
domestic stockpiles start shrinking only then you will see shrinkage in LME
stockpiles in Asian locations," VTB's Kryuchenkov said.	
    In other metals, aluminium dipped below $2,000 per tonne for the
first time since December 2011, touching $1,999, before ending the day down $19
at $2,010.	
    Norsk Hydro will shut its 180,000-tonnes-per-year aluminium smelter
in Australia due to low metals prices and a dismal economic outlook, the latest
producer to take steps to stem losses. 	
 Metal Prices at 1803 GMT
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
  COMEX Cu       341.20       -7.50     -2.15     343.60     -0.70
  LME Alum      2008.00      -21.00     -1.03    2020.00     -0.59
  LME Cu        7531.00     -208.00     -2.69    7600.00     -0.91
  LME Lead      1928.50      -36.50     -1.86    2035.00     -5.23
  LME Nickel   16755.00     -145.00     -0.86   18710.00    -10.45
  LME Tin      19525.00     -180.00     -0.91   19200.00      1.69
  LME Zinc      1879.00      -32.00     -1.67    1845.00      1.84
  SHFE Alu     16000.00      -50.00     -0.31   15845.00      0.98
  SHFE Cu*     55300.00     -780.00     -1.39   55360.00     -0.11
  SHFE Zin     14755.00     -190.00     -1.27   14795.00     -0.27
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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