Friday, 24 July 2015 17:43
LONDON: Copper slumped to the lowest levels in six years on Friday after weak factory data from top metals consumer China highlighted lacklustre demand that could send prices even lower.
China’s factory sector contracted by the most in 15 months in July as shrinking orders depressed output to its lowest level since March 2014, the preliminary Caixin/Markit survey showed.
Concerns over the Chinese economy combined with other headwinds are likely to keep weighing on metals markets, said Xiao Fu, head of commodity market strategy at Bank of China International in London.
“Input costs for miners are falling, the fundamentals are not strong, and there’s a general sentiment of rotating outside of commodities to other asset classes,” she said. “So the combination of all those factors is likely to sustain pressure on the market.
In addition, the summertime is typically a lower-demand period.” Three-month copper on the London Metal Exchange fell to $ 5,191.50 a tonne, its cheapest since July 2009, before paring losses to $ 5,254 by 1000 GMT, a dip of 0.3 percent.
Copper was facing a loss of about 4 percent on the week, which would be its biggest weekly fall in about a month.
In the short term, $ 5,000 a tonne could offer support to the copper market, Fu added.
Given June indicators had pointed to recovery, and it was the first time Caixin had published the factory report, another reading was required to determine whether this was a trend or a weak patch before a recovery in demand after the summer, said analyst Helen Lau of Argonaut Securities in Hong Kong.
“Today, it’s big, bad news with this number well below consensus. It shows there’s no sign of recovery in small and mid-sized business in China, but I think it’s also related to the summer weak season for demand.”
Also depressing market sentiment was data showing euro zone business activity started the second half on a less secure footing than expected.
Among other metals, aluminium was the only one in positive territory, rising 0.3 percent to $ 1,640.50 a tonne.
A trader said buying emerged after the metal held fast at levels just above a six-year low of $ 1,631.50 struck earlier in July. Nickel was the worst performer, sliding 1.7 percent to $ 11,260 a tonne on disappointment over stubbornly high nickel inventories.
LME nickel stocks have failed to show steady declines as forecast by some investors who have been counting on an Indonesian ban on ore exports last year to cause shortages.
