Copper prices fall 25% as stocks build up
Copper prices have fallen about 25 per cent since the 2010 high of $7,796 (Dh28,634) hit on January 7.
"While we believe this recent price weakness is creating an opportunity, we would look for a floor to be established before buying emerges," Barclays Capital said in a note.
"Despite overriding concerns about monetary tightening, signals from the metals markets are increasingly encouraging. Deliveries into LME warehouses have started to slow for a number of metals, anecdotal reports are encouraging."
Copper stocks in LME warehouses are more than double the levels in the middle of July last year, but over the past couple of weeks they have hovered around 540,000 tonnes.
Copper crashed to its lowest in more than three months last week, hammered by dollar strength, renewed fears about the health of the global economy and sovereign default.
Aluminium slid to a two-month low of $1,991 a tonne, and zinc to $1,985, its lowest since the middle of October. Lead dropped to $1,935, a five-month trough, and nickel to $17,130, a level last seen on December 18.
Benchmark copper tumbled to $6,225 a tonne, its lowest since October 19. The metal used in power and construction was trading at $6,260 a tonne from $6,390 at the close on Thursday.
Investor selling of commodities and equities accelerated after European Central Bank President Jean-Claude Trichet's comments on Thursday reinforced worries about the indebtedness of a number of economies in the euro zone.
"Losses have been driven by risk aversion, you have the dollar quite strong and there are a lot of concerns about debt conditions in Europe and potentially elsewhere," said Dan Brebner, analyst at UBS.
"There was a significant amount of confidence in the US economy. Investors are questioning that. There's an element of panic behind the selling." The dollar hit a seven-month high against a currency basket as a widening in euro zone government bond spreads against benchmark German government bonds highlighted escalating worries about sovereign default.
Traders say data from the US has been mixed in recent weeks and that up until last week, the tendency had been only to respond to the positive numbers.
But focus has shifted and the market is on alert for key monthly jobs data from the US, the world's largest economy, later on Friday.
Expectations that central banks and governments around the world will drain liquidity from markets, have been fuelled by some policy tightening in China and in Britain. Stocks of aluminium, used in transport and packaging, fell 7,900 tonnes to 4.58 million tonnes.
Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.
Follow Emirates 24|7 on Google News.