COPPER fell to a three-week low yesterday, dragged down by signs of cooling in top consumer China and holidays across most of Europe, but prospects for demand reviving later this year deterred sellers.
Three-month copper on the London Metal Exchange traded at $8902 a ton in early trading, compared with $8938 at Friday’s close. It hit its lowest since May 24 at $8864,75 but remained some way from last month’s trough near $8500, which was its cheapest since December.
"We’re still in this phase where people are starting to worry about the economic recovery," Standard Chartered analyst Daniel Smith said. "The dollar has generally been strong and this is in line with risk aversion, which is creeping in."
Markets continued to digest last week’s Chinese trade data, which showed tepid copper imports. Yesterday, data showed China’s money growth slowed to a 30-month low last month and banks extended fewer new loans than expected.
Chinese inflation data will be watched for fresh indications as to whether Beijing is successfully taming inflation and for a clearer view on a still mixed picture for copper consumption.
Consumer and producer price indices are due today.
"If the measures being taken in China are genuinely having an impact on inflation, then that’s very good news for the metals," Natixis analyst Nic Brown said yesterday. "Or you could look at it another way: Chinese authorities are still looking to clamp down on credit. If this is affecting industry and base metals but is not yet having a material impact on inflation, that is not good news."
A London trader said "bits and pieces" of bargain hunting from the Far East had come in to support copper, but demand was muted due to holidays in much of Europe and a stronger dollar.
"With much of Europe shut we expect the market to drift a little bit lower … the question is how long it will be before the buyers step in," he said. "I don’t expect prices to fall back to $8500. I think we will see support near $8800."
The euro was under pressure as concern about policy makers’ attempts to handle the Greek debt crisis prompted investors to cut exposure.
On copper, Macquarie reiterated its expectations demand will gain pace over the second half as Chinese purchases revive and as a result of healthy demand in other parts of the world.
"Gradually over the next one to two months, we see Chinese imports rising given China could continue to destock at recent rates for an absolute maximum of three to four months before it runs out of copper," Macquarie said in a note.
Copper stocks declined from more than one-year highs, figures showed yesterday, dropping by 2175 tons net, mostly due to a 1475 -ton shipment from South Korea’s Busan. Aluminium was at $2589, down from $2619 a ton. Reuters
