Thursday, 28 February 2013 21:35
LONDON: Copper slid on Thursday after data showed the US economy barely grew in the fourth quarter and as metals investors worried over scant demand from top consumer China.
Three-month copper on the London Metal Exchange shed 0.7 percent to $7,817 a tonne by 1350 GMT, after trading in official midday rings at $7,860. It hit its lowest since Dec. 21 at $7,785 on Tuesday.
Prices tumbled by about $20 in a matter of minutes after data showed US gross domestic product expanded at a 0.1 percent annual rate in the fourth quarter, missing the 0.5 percent gain forecast by analysts in a Reuters poll.
The move sent copper below its 200-day moving average, a key indicator used by technical analysts who look at chart patterns.
Aluminium also breached its 200-day moving average on Thursday and hit the lowest levels in nearly three months. Three month aluminium lost 0.7 percent to $2005 a tonne in official rings and touched a session low of $1,993.85.
But European shares and oil were higher, supported by comments by Fed Chairman Ben Bernanke and pledges by the European Central Bank this week to continue with steps to inject liquidity into markets.
"Ben Bernanke basically gave a green light to go out and buy whatever risky asset you like, but copper is not really reacting," Natixis analyst Nic Brown said.
"It reflects the diminishing significance of the US as the driving force behind the base metals market. For base metals to push significantly higher it has to come from China."
An expected surge in demand for copper from China, the world's biggest consumer of the metal, after the Lunar New Year holiday earlier this month has so far failed to materialize.
Some analysts are saying investors should be patient, and that trade should pick up towards the end of next week or later in March.
"Chinese workers only started to come back last week, so it's probably too early to argue that we'll see any change in the physical market, which is dead," said Macquarie Bank analyst Bonnie Liu in Singapore.
In a further dampener on copper, Chile's output rose almost 9 percent in January compared with the same month last year, on higher ore grades and improved productive capacity at some deposits.
World No. 1 copper producer Chile is seeking to increase output in many of the its tired, ageing mines. But analysts warn accidents, extreme weather and energy woes threaten to curb forecast production jumps.
Investors also worry the uncertain situation following elections in Italy, the euro zone's third-largest economy, could reignite the bloc's crisis, now in its fourth year, and further dampen already weak demand for industrial metals in the bloc.
"Sentiment seems to be stabilizing," Credit Suisse said in a research note.
"However, new economic impetus would be required for a more durable stabilization. In this context, PMIs for China and the US due this Friday will be watched particularly closely."
The median forecast from a Reuters poll of 14 economists showed China's official purchasing managers' index (PMI) likely edged lower to 50.2 in February after seasonal adjustments, from January's 50.4.
But copper could get a boost from tensions between the Mongolia authorities and Rio Tinto over the $6.2 billion Oyu Tolgoi copper and gold project the miner controls.
Mongolia has cancelled a gold mining licence indirectly linked to the project. The cancellation followed a string of complaints by the government over Oyu Tolgoi.
In other metals, tin, untraded in rings, was bid at $23,500 from $23,475 at the close on Wednesday, lead, also untraded, was bid at $2,290 from $2,304 and nickel was bid at $16,710 from $16,700.
Zinc was $2,080 in rings from $2,076.
Copyright Reuters, 2013