Copper prices tumbled sharply on Monday after breaking through a succession of support levels on the back of Fridays late slide. But despite three months prices falling below the key psychological $2,500 level, coppers nearby spreads stayed tight.
At its nadir, copper slid to $2,486 per tonne in the first ring, a decline of $81 from Fridays kerb close.
Traders attributed the move to follow-through selling triggering sell-stops in a market undermined by a bout of technical fund liquidation on Friday, traders said.
By the end of the morning session, however, prices had rebounded to finish at $2,498, down $69, although copper was unable to regain a convincing grip above $2,500.
Although the price came down heavily, the backwardation in nearby months particularly July/August remained wide, and traders said the tightness could deepen against a background of low LME stocks. Inventories rose slightly by 225 tonnes on Monday morning.
The cash to threes backwardation was last at $138/$142, similar to the high from last week. The nearby spreads widened further, hitting a peak of $140 in the rings as major short positions were rolled forward amid a market in the grip of a technical squeeze, brokers Brandeis wrote in a report referring to Fridays trading.
But traders shrugged off news that the South Korean finance ministry was investigating overseas futures trading by Korean companies. Korean brokers and traders said the ministry was probing a recent sharp increase in South Korean base metal futures and options trade on the LME. Its interesting to see how this develops, but news of an investigation is not going to move the market, an LME floor trader said.
The other base metals felt coppers pain and drifted lower in sympathy, although most came off their lows by the end of the kerb.
Aluminium was down $4 at $1,574, well within the recent $1,550-$1,600 price range. Zinc, which rocketed last week on speculative buying to near seven-year highs, also drifted back from Fridays highs above $1,400. But at $1,395 it was just $5 down from the previous kerb close.
Nickel was nervous and a touch weaker at $7,220, down $50, as the market awaited fresh news on the Inco strike at Sudbury. But support at $7,200 was evident when prices flirted with the downside.
