Copper sank to its lowest level this year on heavy volume as global growth prospects worsened after data showed the United States gained the smallest number of jobs in a year, which added to pessimistic data from China and Europe.
Copper was down for a fifth straight week, losing close to 4 percent of its value in the past five days, and nearing bear market territory for the year as investors shunned risk amid mounting despair over the weakening global economy and a less-desirable demand outlook for industrial metals.
“There's no question that at this stage of the game it is abundantly clear that the global economy is slowing, not growing,” said Adam Sarhan, chief executive of Sarhan Capital.
Three-month copper on the London Metal Exchange (LME) fell to its lowest since Dec. 20 at $7,301 a tonne earlier in the day before ending down $64 at $7,361.
London markets will be closed on Monday and Tuesday for the Queen's diamond Jubilee.
In New York, the July COMEX contract fell 5.20 cents to settle at $3.3135 per lb, after dealing between $3.30 and $3.3775.
COMEX copper's volume spiked above 100,000 lots in late New York trade, more than a third above the 30-day norm, according to preliminary Thomson Reuters data.
The intraday low of $3.30 on Friday was down nearly 18 percent from its February peak of $4. A drop of 20 percent is considered by some investors to be a bear market.
“We are now flirting with bear-market territory in copper,” Sarhan said.
COMEX copper's technical picture deteriorated on Friday after its nearby 50-day moving average crossed below 200-day moving average to form an ominous technical signal known as a “death cross” that could drag prices of the metal back down toward the $3 level, technicians said.
Other metals also fell, with nickel hitting a 2.5-year low at $16,021 a tonne and lead dipping below $1,900 a tonne, levels last seen
in October 2011.
Losses in the industrial metals complex gathered speed after data showed US job growth slowed in May and the unemployment rate rose for the first time since July, putting pressure on the Federal Reserve to ease monetary policy further to shore up the sputtering recovery.
“We are seeing such widespread disappointing data across the world at the moment, (it's) not really surprising that you are seeing metals markets retreat quite rapidly towards marginal cost of production, especially copper which is furthest above marginal cost of production,” said Ross Strachan, an economist at Capital Economics.
China's slowdown worsened in May as its factories saw a further deterioration in demand at home and abroad. In Europe, the euro zone manufacturing index reached its lowest level since June 2009, and British manufacturing activity shrank at its fastest pace in three years.
“The official Chinese PMI (purchasing managers' index) number was the only one not showing any weakness until now, and the market appears to be pricing in the reality that these economic troubles are not going to disappear,” analyst Eugen Weinberg of Commerzbank said.
Nickel, the worst LME performer, is ripe to bounce back in June after a slide has forced nickel pig iron (NPI) producers out of business and a seasonal supply kink has helped shore up the physical market, RBC Capital said in a research note.
LME nickel ended off $130 at $16,100 a tonne, having hit its lowest level since December 2009 earlier in the session.
Russian metals giant Norilsk Nickel suspended shipments from its Arctic port of Dudinka in May as flooding prompted a seasonal halt.
“The closure disrupts the supply of concentrate to Norilsk's refineries on the Kola Peninsula. The port won't open for another month and shipments into Rotterdam have already slowed,” RBC noted.
Benchmark prices for NPI, a substitute for nickel used in low grades of stainless steel, have also hit their lowest since 2009, while a 20 percent tax on Indonesian ore exports could further crimp supply, it said.
“While there is a decent ore supply in Chinese ports at the moment, it shouldn't take long to burn through the excess supplies, plus production cuts mentioned above should further restrict NPI supplies, which will drive demand for refined nickel,” it said. - Reuters