Base metals on the London Metals Exchange fell Friday, with copper leading the way with a drop of about 5%, due to general profit-taking and speculative selling, traders and analysts said.
Copper broke out to the downside from its recent trading range between $7,000 and $8,200 a metric ton, hitting a more than four-month low of $6,900/ton.
Speculative, momentum and CTA selling pressured prices, Robin Bhar of UBS in London said, driven in part by an increase in stocks. According to LME warehouse data, copper stocks Friday increased 1,625 tons to 148,200 tons.
"Copper suffered a blow to the downside on the back of fund liquidation and fresh selling after Thursday's steady close," said Michael Cuoco of Mitsui Bussan Commodities in New York. "On the radar screen at the moment is the 200-day moving average of $6,860/ton."
LME copper will likely move to a new lower range of $6,700-$7,100/ton, analyst John Kemp at Sempra Metals said. "The market has been looking for a break lower for some time," he said. "Whereas previously there was good support that made the market nervous about going short, the longs are now running out of ammunition."
However, Kemp doesn't expect an "immediate price collapse."
Meanwhile, pressure in the copper market swept over into the other LME metals.
LME three-month nickel prices fell to Friday's lows, driven by profit-taking, said a base metals trader. Nickel trades at $29,500/ton, down from Friday's high of $31,200/ton.
Early Friday, the LME said it lifted the daily backwardation limit of $300 a metric ton on nickel it imposed Aug. 16. A reversion to the normal spread lending guidance will be effective from Monday.
Moreover, Bhar said physical traders report that demand is currently low and significantly off the frenetic levels of three to six months ago.
LME three-month aluminium gave back all of Thursday's gains to trade at Friday's low of $2,705/ton. Earlier Friday, a trader said LME aluminium's poor fundamentals leave the metal to take its direction from other metals.
Despite a new record high of $4,580/ton earlier Friday and a continuous drawdown in stocks, zinc prices gave back the day's gains to trade at a low of $4,260/ton on profit taking and overall base metals weakness. According to LME warehouse data, LME zinc stocks fell by 1,550 tons to 95,620 tons Friday, a 16-year low.
Sister metal lead also gave back Friday's gains to trade at Friday's low of $1,675/ton.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Thursday PM kerb
Copper 6920.0-6921.0 Dn 405.00
Lead 1670.0-1675.0 Dn 70.00
Zinc 4300.0-4305.0 Dn 210.00
Aluminium 2695.0-2700.0 Dn 135.00
Nickel 29300.0-29400.0 Dn 1005.00
Tin 9750.0-9800.0 Dn 250.00
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