SG:London copper falls for 5th day in six on China woes a dollar
Reuters reported that London copper futures dropped for a fifth session out of six and stayed near 20 month lows hurt by a firmer dollar and worries over top consumer China where a liquidity squeeze could curb demand already hit by slower economic growth.
Copper dropped the most in two months last week given the concerns about China and a roadmap from the US Federal Reserve on scaling back its stimulus that has boosted market liquidity for years and helped commodities scale historical peaks. But the bigger worry now is China where the economic recovery could be stalling and may be exacerbated by a potential credit crunch.
China's central bank said that the overall liquidity in the financial system is at a reasonable level after interest rates for short term funds spiked to extraordinary levels last week as big commercial banks held back on lending in the interbank market.
Mr Helen Lau senior mining and metals analysts at UOB Kay Hian Securities in Hong Kong said that "The economic slowdown and the liquidity squeeze will pressure copper prices going forward. This will squeeze copper fabricators who need to borrow money from banks to buy copper. It will also hit the use of the metal in trade financing.ā€¯
Three month copper on the London Metal Exchange dropped 0.7% to USD 6,770 per tonne by 0414 GMT not far from a low of USD 6,692 hit its weakest since October 2011. The industrial metal lost nearly 4% last week in its biggest weekly loss since mid April.
Mr Lau expects copper to drop below USD 6,500, per level last seen in July 2010. The most traded October copper contract on the Shanghai Futures Exchange was down 0.8% at CNY 48,730 per tonne.
Chinese equities fell more than 4% after official news reports over the weekend suggested Beijing will crack down on shadow banking, blamed for the cash crunch in the mainland. The stronger dollar also hurt copper and other commodities priced in the greenback, including oil and gold by making them more expensive for holders of other currencies.
The dollar hit a two week high against a basket of major currencies, adding to its best weekly gain in 19 months that was triggered by the Federal Reserve policy plan.
