Monday, 27 July 2015 13:14
MELBOURNE: London copper fell on Monday to trade near its weakest in six years as concerns over demand in top user China were compounded by a seasonal slowdown in manufacturing activity over the summer and ample supply.
However, the fall led to signs of bargain-hunting, with some analysts suggesting low prices could spur makers of copper products into replenishing inventories.
“It is also possible that China’s State Reserve Bureau will restock at the current low prices,” Argonaut Securities said in a note. “We maintain our view that China’s economic demand in 2H15 will stabilise copper demand.”
China’s factory sector contracted by the most in 15 months in July as shrinking orders depressed output, a survey showed last week, a worse-than-expected result that comes on the heels of a stock market crash since June.
Three-month copper on the London Metal Exchange fell by 1 percent to $ 5,221 a tonne by 0718 GMT, after also ending softer on Friday when it hit a six-year trough of $ 5,191.50 a tonne.
Shanghai Futures Exchange copper slipped by 0.4 percent to 38,310 yuan ($ 6,169) a tonne in the overnight session.
Chinese share prices plunged more than 8 percent on Monday, their biggest one-day drop in more than eight years, as a government-triggered rebound petered out amid profit-taking, concerns over economic health and fears of an end to Beijing’s inclination toward looser monetary policies.
Copper premiums rose by $ 5 to $ 75 on Friday, the highest since early June.
But hedge funds and money managers increased their net short positions in Comex copper in the week ended July 21, US Commodity Futures Trading Commission (CFTC) data showed.
Elsewhere, contract workers demanding better working conditions in Chile have taken control of Codelco’s small Salvador mine, the state-owned copper miner said, raising the stakes in a strike now in its sixth day.
Markets will be focusing this week on a meeting of US monetary officials, which may provide more certainty over a US rate rise. An official reading of China’s factory sector is expected on Saturday.
In news favourable for renewables, which are set to boost copper demand, presidential candidate Hillary Clinton promised on Sunday to push for a dramatic increase in renewable power production, setting a goal of generating enough clean energy to power every US home within 10 years of taking office.
ShFE zinc fell by 2.2 percent to 14,750 yuan a tonne, extending Friday’s sell-off, while ShFE nickel prices fell 1.7 percent, dragging on the London contract. LME nickel fell nearly 2 percent but found support from an improvement in orders from stainless mills, broker Triland said.
“This was reflected in their buying directly as well as in active pricing orders by stainless scrap merchants.”
Tin shipments from smelters in Indonesia, the world’s top exporter of the metal, are expected to tighten in coming weeks due to a change in export rules that is likely to underpin prices.