Tuesday, 17 November 2015 17:50
LONDON: Copper prices plunged to their lowest in more than six years on Tuesday as fears about demand growth in top consumer China and a higher dollar fuelled negative sentiment.
Benchmark copper on the London Metal Exchange hit $ 4,590 a tonne in early trading, its lowest since May 2009. At 1103 GMT the metal used in power and construction was own 0.1 percent at $ 4,687.
Copper demand growth in China, which accounts for nearly half of global consumption estimated at about 23 million tonnes this year, has slowed significantly as industrial and construction activity has dwindled.
“It’s hugely sentiment-driven at the moment,” Capital Economics commodities economist Caroline Bain said.
“It’s not a rosy outlook, but neither is it cataclysmic. I do feel it is an overreaction, but I also would be very reluctant to say when it will stop because there is momentum and it can become quite self-fulfilling.”
The latest sign of weak demand came from Chile’s Codelco , the world’s biggest copper producer, which sources say has cut its 2016 premium to China for the refined metal by more than a quarter to a three-year low.
“Codelco is trying to secure market share. We all know China is now producing a lot more refined copper itself. It doesn’t mean demand for final use is going to be lower, it just means the sourcing is different,” Capital Economics’ Bain said.
Still, ample supplies in China can be seen in bonded copper stocks, which are up to 430,000 tonnes from 360,000 tonnes in late September, according to figures from consultancy CRU.
Growing expectations that the U.S. Federal Reserve will raise interest rates in December are behind the stronger U.S. currency, which makes dollar-denominated commodities more expensive for companies outside the United States.
“The still-firm U.S. dollar is … weighing on prices,” Commerzbank said in a note. “Prices are facing headwinds first and foremost from speculative financial investors.”
Three-month aluminium tumbled to $ 1,457 a tonne, its lowest since June 2009, with the metal having come under pressure for most of this year from worries about oversupply.
It was last up 0.5 percent at $ 1,475 a tonne, partly on news that Russian aluminium giant Rusal plans to decide in mid-December which smelters to suspend as a part of its plans for potential output cuts up to 200,000 tonnes.
Zinc was down 0.5 percent at $ 1,579, lead gained 0.1 percent to $ 1,598, tin fell 0.5 percent to $ 14,625 and nickel was down 0.3 percent at $ 9,285.
