* Copper hits lowest level since July 2010
* China credit squeeze, slower economy may hurt demand
* Freeport resumes some output at world's No.2 copper mine
By Susan Thomas and Harpreet Bhal
LONDON, June 24 Copper slumped to its lowest
level in almost three years on Monday, pressured by a firmer
dollar and concerns that a possible liquidity squeeze could hurt
the economy and demand in top metals consumer China.
Copper was also hit by the announcement last week of a
timeframe for the U.S. Federal Reserve to scale back its
stimulus programme, which has boosted market liquidity and
helped commodities touch record levels.
Three-month copper on the London Metal Exchange
touched a session low of $6,613 a tonne, its lowest since July
The metal closed at $6,670 a tonne, down more than 2 percent
from a close of $6,818 on Friday. It fell nearly 4 percent last
week in its biggest weekly loss since mid-April.
"In line with the majority of the commodity complex, base
metal prices have come under significant pressure over the past
week," Barclays analyst Gayle Berry said.
"The broad risk-off move has been driven largely by macro
developments, essentially a combination of continued weakness in
Chinese economic data and a shortened time horizon for Fed
An additional worry in China, the world's biggest consumer
of base metals, was a potential cash crunch.
China accounts for around 40 percent of global refined
China's central bank said on Monday the overall liquidity in
the financial system was at a reasonable level after interest
rates for short-term funds last week rose to extraordinary
levels as big commercial banks held back on lending in the
The overnight repo rate, a measure of funding
costs in China's interbank market, peaked at near 12 percent
"With Shibor still at elevated levels ... financial assets
were further sold across the board," Marex Spectron analyst
George Adcock said.
China shares suffered their biggest daily loss since August
2009 on Monday, with financials hammered on worries the central
bank would keep money tight and that economic growth could slow
A stronger dollar also hurt copper and other commodities
priced in dollars, including oil and gold, by making them more
expensive for holders of other currencies.
Also dampening copper was the resumption of operations at
the world's No.2 copper mine. Freeport McMoRan Copper and Gold
Inc has restarted some operations at its Grasberg mine
in Indonesia, ramping up output six weeks after a tunnel
collapse that killed 28 people.
"Production had been suspended following the serious mine
accident in mid-May. That said, it is likely to take some weeks
yet before the original production rates are achieved again,"
analysts at Commerzbank said.
Zinc ended at $1,825 from $1,844 at the close on
Friday, while tin ended at $19,575 from $20,000 and
nickel was $13,630 from $14,075. Lead ended at
$1,995 from $2,020 on Friday.
Aluminium, untraded at the close, was bid at $1,771
from a close of $1,793 on Friday.