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opper falls to one-month low on demand worries

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By Pratima Desai and Humeyra Pamuk of Reuters
LONDON -- Industrial metals lost ground on Wednesday, with copper slipping to a one-month low as investors worried about slower economic and demand growth.
Traders and analysts said they have observed long liquidation by funds as market participants did not want to carry big positions ahead of the Easter holidays, when a majority of the European and US markets will be shut.
Copper, used in power and construction, fell to $USUS7,940 per tonne, its lowest level since February 18, and was last at $USUS7,980 per tonne, down from Tuesday's close of $USUS8,210.
"Given the nervousness and fear out there people are not willing to have big positions ahead of the long weekend," said Leon Westgate, analyst at Standard Bank said.
On Tuesday, the US Federal Reserve cut its benchmark interest rates by 75 basis points to 2.25 per cent, trying to boost confidence in the financial markets and improve growth prospects.
But still worries about a slowdown in the world's biggest economy, which could mean softer demand for industrial metals, continue to haunt investors.
"Rate cuts may not solve the credit market crisis. Other monetary and fiscal stimulus will almost certainly be required to pull the US out of recession," Fairfax said in a note.
Commodity markets have been on the rise recently, with gold and oil jumping to successive highs, thanks to new investment money rather than supply and demand fundamentals.
But after the breathless rally, the focus shifts to indicators about the global economy.
"In the short term there is a bit of nervousness about growth ... People are getting worried about China in the sense of tighter government policy to curb inflation," said Jim Lennon, analyst at Macquarie Bank.
Too strong
"But fundamentally base metals markets are still tight. Commodities trading on exchanges have actually underperformed those just driven by supply/demand fundamentals."
That analysts say is probably because of the greater involvement of investors in listed commodities, which have soared to historical highs this year on a flood of new money.
Traders said falling stocks of copper in LME warehouses at around 123,000 tonnes, down nearly 40 per cent since the start of the year and the premium for cash material over the three-month contract showed how tight the market was.
The premium or backwardation of around $US130 a tonne compares with a discount or contango of $US40 at the end of last year.
Tin traded at $US20,700 a tonne from $US20,650 on Tuesday, when it hit a record high of $US20,950 on worries about supplies from top producers China and Indonesia.
"For tin, the market is tight. Stocks continue to draw down but you have to also recognise that it is already a strong price," said William Adams, analyst at BaseMetals.com.
Stocks of tin at less than 10,000 tonnes are down by more than 60 per cent since last August.
However, a steady rise in aluminium stocks to around 1.03 million tonnes from 945,000 tonnes earlier in March is expected to weigh on prices of the metal used in the power, packaging and transport industries.
"Now we have got over a million tonnes of aluminium stocks, I don't see aluminium prices rising higher," Mr Adams said.
Aluminium traded at $US2,920 a tonne from $US2,992 on Tuesday. The energy-intensive metal has been supported by record high oil prices and output problems in South Africa.
Zinc tumbled more than 5 per cent at some point and was last at $US2,415 from $US2,528 on Tuesday and nickel was at $US29,500 from $US30,200.
Lead fell 5 per cent to $US2,800 a tonne as speculators sold after the metal used to make batteries failed to sustain levels above $US2,900 a tonne, traders said.
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