Copper near two-week lows

Published Jan 6, 2014

Share

London - Copper fell on Monday to near a two-week low on concerns about China's economic recovery following news that growth in the services sector had slowed and Beijing was ramping up efforts to reign in shadow bank lending.

China accounts for about 40 percent of global copper demand.

Overnight data showed growth in its service industries had slowed in December, mirroring a slowdown in manufacturing and confirming views that the world's second-largest economy lost steam at the end of last year.

In addition, China's cabinet has issued new rules to strengthen regulation of shadow-bank lending, which has helped fuel an explosion in debt levels since 2008, in the latest effort to address rising financial risks.

Copper fell 7.2 percent in 2013, though it gained more than 4 percent in December as a decline in readily available refined metal in exchange-authorised warehouses helped push up the premium for cash copper, which reached $16.50 a tonne over the benchmark price on Monday.

“It has to be seen if the reductions in LME stocks are real or (reflect) hidden stock movements,” T-Commodity analyst Gianclaudio Torlizzi said.

He added: “In the end, macro factors are weighing on metals. We think generally it could be a month in which new fears about the Chinese banking sector will reappear, pushing metal prices down.”

Underpinning copper, however, was a raft of European services sector data that indicated gradual recovery in Italy and Spain.

Three-month copper on the London Metal Exchange fell its lowest since December 24 at $7,278.75 a tonne on Monday.

It was down 0.30 percent $7,293 by 12:40 SA time from the previous session, when it fell 1.1 percent.

Weighing on copper, Shanghai bonded copper premiums slipped by around $10 to $170-$195 from $180-$205 on December 17, reflecting a softening in appetite for physical copper.

Also, the dollar neared a four-week high versus the euro, lifted by an upbeat outlook for the US economy from Federal Reserve Chairman Ben Bernanke, which supported expectations of faster stimulus reduction by the US central bank.

A strong dollar makes dollar-priced metals costly for non-US investors.

Wednesday's December Fed meeting minutes and then Friday's non-farm payrolls data will give further clues on how quickly the Fed could unwind the stimulus that has been a major driver for global risk assets such as metals in the past few years. - Reuters

Related Topics: