London 09/05/2012 - Base metals hit fresh multi-week and multi-month lows on Wednesday morning when eurozone concerns continued to pummel the market.
Greek leaders have failed to form a coalition government, leading to growing concerns that a political impasse could push the country either towards a default or even an exit from the eurozone.
The euro fell for the eighth consecutive day against the dollar, its longest losing streak since 2008. The single currency is now at 1.2977 after earlier dropping to 1.2962.
There is likely to be little respite in the short term against a backdrop of increasing fears that the financial bailout from 2011 could be at risk.
"All of this has unsettled markets," broker RBC said. "We expect prices to test support over the coming sessions as the overall sentiment continues to worsen across the commodity complex."
In further eurozone developments, the yield on Spanish 10-year bonds has risen through the key milestone of six percent.
On the data side, attention later this week will be on a series of Chinese figures, including data for trade, inflation and industrial output.
In the metals, copper was recently at $8,004 per tonne, down $91 on the previous day's close and a fresh two-week and session low.
For now, the immediate downside target is the psychologically important $8,000 pivot level, although there is a downside cushion from the persistent nearby tightness and falling inventories, which are now at their lowest since October 2008.
Warehouse stocks fell further, dropping a net 7,525 tonnes to 220,925 tonnes. Cancelled warrants have plummeted, losing 13,350 tonnes to 54,500 tonnes.
In the nearby spreads, 'TOM/next' (tomorrow/next day) was trading at $10 backwardation, while the crunch period of May/June stood at a wider $39/40 premium.
Aluminium at $2,033 was down $24 and at its lowest since January 5. Inventories dropped a substantial 20,875 tonnes to 4,959,425 tonnes, the lowest since December 22.
The drawdowns were mainly due to Vlissingen and Detroit and New Orleans, where stocks fell 6,000 tonnes, 5,775 tonnes and 3,125 tonnes respectively. Cancelled warrants at 1,578,775 tonnes were also down, dropping 19,425 tonnes.
Zinc lost $24 to $1,951. Inventories continue to build, with warehouses now holding 936,650 tonnes of the metal, up 3,050 tonnes, the highest since May 4, 1995. The bulk of the increase was due to New Orleans, up 6,350 tonnes. Cancelled warrants were down, losing 3,475 tonnes to 30,750 tonnes.
Lead fell $38 to $2,052, a near-three-week low. Stocks at 353,825 tonnes were down 2,700 tonnes, while cancelled warrants have declined 1,425 tonnes to 83,250 tonnes.
Nickel at $17,161 was down $194, with inventories up a marginal 50 tonnes at 105,792 tonnes. Tin at $20,800 is now at its weakest since January 16, down $700. Stocks were down 105 tonnes at 14,480 tonnes and cancelled warrants were at 1,405 tonnes.
Steel at a soft $480/495 is struggling to get back over $500.
“At $490 a tonne, LME steel is trading at its lowest level for one-and-a-half years. In the current market environment it should be difficult for the price to regain the $500 a tonne mark, especially since the recovery in the EU is making only sluggish progress too,” Commerzbank said.
Finally, in the minor metals, cobalt was indicated at $30,100/31,750 and molybdenum at $30,000/31,000.
(Additional reporting by Martin Hayes, editing by Mark Shaw)