Copper dips on eurozone debt woes

LONDON - Copper prices fell on Wednesday, as the euro fell versus the dollar and sentiment remained fragile as investors fretted over mounting debt problems in the Eurozone.

A rescue plan by the European Union and the IMF worth 750 billion euros ($952.7 billion) has helped calm markets, giving world stocks a boost earlier this week, but traders still expect a decent amount of volatility ahead.

On Wednesday, European shares jumped more than 1 percent and the euro strengthened versus the dollar, after an initial weakening, on signs of continued German growth and Spain's plans to cut deficit.

"People are still quite worried about the whole situation in the Eurozone, so sentiment is a little bit on edge at the moment," said Daniel Smith, an analyst at Standard Chartered.

"But the underlying picture is still pretty good overall," he added.

Benchmark copper for three months delivery on the London Metal Exchange closed at $7,025 a tonne in official rings from $7,050 at Tuesday's close. The metal, used extensively in construction and wiring, dropped to $6,632.75 a tonne last week, its weakest since mid-February.

A stronger dollar makes dollar-denominated industrial metals more expensive for non-U.S. currency holders.

Investors also worried about possible steps by top metals buyer China to cool its red-hot economy.

China's consumer inflation rose a little more than expected to 2.8 percent in April, data on Tuesday showed, but a larger worry may be the rise in property prices that analysts called the biggest since records began about five years ago.

OPEN INTEREST STABILISES

Headline inventory data suggested a bullish fundamental outlook for copper and aluminium, which have seen stock drawdowns of 1,075 tonnes and 7,275 tonnes respectively.

But cancelled warrants data -- showing the material earmarked for delivery -- pointed to 17,000 tonnes for copper versus levels above 30,000 tonnes in late April.

Aluminium cancelled warrants were at 281,100 tonnes versus 265,500 tonnes on April 30. Aluminium was at $2,128 a tonne from $2,105.

Open interest in copper has risen by 898 lots on Wednesday, after posting sharp falls earlier this week, with the total standing at 271,366 lots, its lowest since end-April.

"Copper has been losing its appeal among investors since April and now the latest correction evidently saw more participants leaving the market," said analyst Andrey Kryuchenkov at VTB Capital said in a research note.

"The total open interest in LME copper seems to have stabilised for now, though new shorts did accumulate after we pulled back below $7,300."

In industry news, Rio Tinto Chief Executive Tom Albanese hit out at the Australian government over a new tax proposal on mining profits, ordering a review of new investments in the country.

Chile's giant Collahuasi copper mine said it had declared force majeure to clients because of a subcontractor protest, but aimed to normalize suspended operations in the next 24 hours.

Steel-making ingredient nickel was not traded in rings but was last quoted at $22,550/22,600 a tonne, from Tuesday's $22,590, while battery material lead was at $2,044 from $2,050. Zinc traded at $2,100 from $2,070 and tin was last quoted at $17,725/17,750 from $17,500.