Thursday, 12 November 2015 17:28
LONDON: Copper prices slid to a 2-1/2 month low on Thursday, weighed down by a strong dollar, weak Chinese credit data and concern about oversupply after inventories rose.
Copper was heading for its fifth losing session out of six, hurt by a rise in the dollar index after the head of the European Central Bank underscored the bank’s readiness to extend money printing.
A firmer dollar dampens demand for metals priced in the US currency, making them more expensive for buyers outside of the United States.
Three-month copper on the London Metal Exchange was down 1.2 percent at $ 4,886 a tonne by 1100 GMT after dropping as low as $ 4,882, its weakest since Aug. 24.
“Macro sentiment is the main overlay at the moment. All the metals are a bit weaker, so it looks like that dollar strength and weaker Chinese data is hitting the market,” said analyst David Wilson Citi in London.
“We had data out on Chinese new loans, which were massively weaker than expected.”
Data showed that credit activity in China’s financial system dropped to its lowest level in 15 months in October, highlighting the challenges the country faces as it seeks investment to reinvigorate growth. China is the largest metals consumer, accounting for nearly half of global copper demand.
The metal used in power generation and construction has been declining in recent sessions despite supply cuts and is moving closer to this year’s bottom of $ 4,855 reached in August, its weakest since July 2009.
The most-traded January copper contract on the Shanghai Futures Exchange (ShFE) closed down slightly at 37,310 yuan ($ 5,861.01) a tonne.
The main feature of the market this week has been heavy selling by Chinese funds on the ShFE, Wilson said.
“We’ve seen some funds long on the LME having to close out those long positions on the back of those Chinese moves.”
Also pressuring copper was LME data showed that copper inventories climbed by 4,750 tonnes, highlighting worries about surplus metal.
Goldman Sachs analysts said: “2015 has seen slow rates of copper mine supply growth on supply disruptions and price-related closures and refurbishments”.
Price declines despite the lack of supply growth “speaks to the ongoing demand weakness and deflationary cost environment which has driven the market into surplus and reduced cost support,” they said in a note.
In other LME metals, aluminium shed 0.8 percent to $ 1,506.50 a tonne, zinc was down 0.7 percent to $ 1,612.50 and nickel was off 1.4 percent to $ 9,535.
