Copper sinks to two-month low, demand fears dominate
Copper fell to its lowest in more than a month on Friday as investors retreated from the industrial metal on escalating fears over economic and demand growth in the United States and the euro zone, both mired in a debt crisis. Other base metals followed copper’s lead, but some being less liquid suffered bigger falls. Aluminium fell to $2,453 a tonne, its lowest since July 12, lead slid to a two-month low of $2,392 and nickel to $23,000 also the lowest since July 12.Zinc fell to two-month lows of $2,230 and tin $24,350 a tonne, its lowest since November 2010.
Benchmark copper on the London Metal Exchange hit $9,143 a tonne, its lowest since June 29, heading for its biggest weekly fall since March. The metal used in power and construction traded at $9,201 a tonne in official rings from $9,355 a tonne at Thursday’s close.
Concern about the economic health of the United States, the world’s largest economy, were reinforced this week with below consensus data, while in the euro zone worries that debt problems could spread to Italy and Spain mounted.
“It’s a macro play at the moment, its not surprising to see base metals under pressure,” said Eugen Weinberg, commodities analyst at Commerzbank. “Markets are looking into the second half of the year and seeing weaker data and growth, industrial metals especially are very sensitive to economic developments.”
Commodity and financial markets are waiting for a monthly jobs report from the United
States, the world’s second largest copper consumer, which some think could fall into recession
over coming months.
“Prices for industrial metals may face further headwinds in the near-term as economic
sentiment remains subdued,” Credit Suisse Private Banking said in a note.
RESILIENT DEMAND
A decision to end a strike at Chile’s giant Escondida mine will ease supply fears. Workers at the mine accepted a company offer to end a two-week strike that shut down the world’s top copper deposit and stoked fears of a global supply shortage.
“This has helped copper’s move down, but I wouldn’t overstate its influence,” Weinberg said.
Analysts are also watching China, the world’s largest consumer of copper, accounting for nearly 40 percent of global demand estimated this year at around 20 million tonnes.
China’s absence from the international market has since February, when copper hit a record high of $10,190 a tonne, weighed on sentiment. Analysts say Chinese consumers have used up inventories built up in previous years when prices were lower.
“Copper and aluminium are our preferred base metal exposures. Our view on copper is based on resilient Chinese demand, constrained supply, and signs that Chinese destocking is coming to an end,” Morgan Stanley said in a note.
“The improvement in aluminium demand that we highlighted earlier this year has continued, with inventory financing and delivery bottlenecks reinforcing resilient prices.”
Inventory financing is a reference to bank deals which are said to have tied up about 70 percent of aluminium stocks in LME-registered warehouses, which currently stand at above 4.4 million tonnes.
Long queues to get metal out of warehouses in Detroit have also helped to support aluminium, used widely in power, transport and packaging.
Three-month aluminium was untraded in the rings, but bid at $2,456.5 a tonne in official rings from $2,476 at the close on Thursday, zinc traded at $2,278.5 from $2,330, lead was bid at $2,440 from $2,490, tin traded at $24,775 from $25,505 and nickel at $23,125 from $23,650 a tonne.
Benchmark copper on the London Metal Exchange hit $9,143 a tonne, its lowest since June 29, heading for its biggest weekly fall since March. The metal used in power and construction traded at $9,201 a tonne in official rings from $9,355 a tonne at Thursday’s close.
Concern about the economic health of the United States, the world’s largest economy, were reinforced this week with below consensus data, while in the euro zone worries that debt problems could spread to Italy and Spain mounted.
“It’s a macro play at the moment, its not surprising to see base metals under pressure,” said Eugen Weinberg, commodities analyst at Commerzbank. “Markets are looking into the second half of the year and seeing weaker data and growth, industrial metals especially are very sensitive to economic developments.”
Commodity and financial markets are waiting for a monthly jobs report from the United
States, the world’s second largest copper consumer, which some think could fall into recession
over coming months.
“Prices for industrial metals may face further headwinds in the near-term as economic
sentiment remains subdued,” Credit Suisse Private Banking said in a note.
RESILIENT DEMAND
A decision to end a strike at Chile’s giant Escondida mine will ease supply fears. Workers at the mine accepted a company offer to end a two-week strike that shut down the world’s top copper deposit and stoked fears of a global supply shortage.
“This has helped copper’s move down, but I wouldn’t overstate its influence,” Weinberg said.
Analysts are also watching China, the world’s largest consumer of copper, accounting for nearly 40 percent of global demand estimated this year at around 20 million tonnes.
China’s absence from the international market has since February, when copper hit a record high of $10,190 a tonne, weighed on sentiment. Analysts say Chinese consumers have used up inventories built up in previous years when prices were lower.
“Copper and aluminium are our preferred base metal exposures. Our view on copper is based on resilient Chinese demand, constrained supply, and signs that Chinese destocking is coming to an end,” Morgan Stanley said in a note.
“The improvement in aluminium demand that we highlighted earlier this year has continued, with inventory financing and delivery bottlenecks reinforcing resilient prices.”
Inventory financing is a reference to bank deals which are said to have tied up about 70 percent of aluminium stocks in LME-registered warehouses, which currently stand at above 4.4 million tonnes.
Long queues to get metal out of warehouses in Detroit have also helped to support aluminium, used widely in power, transport and packaging.
Three-month aluminium was untraded in the rings, but bid at $2,456.5 a tonne in official rings from $2,476 at the close on Thursday, zinc traded at $2,278.5 from $2,330, lead was bid at $2,440 from $2,490, tin traded at $24,775 from $25,505 and nickel at $23,125 from $23,650 a tonne.
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