LONDON: The price of copper fell on Wednesday after Moody's downgraded China's credit ratings for the first time in 30 years, raising concerns over demand at the world's largest consumer of industrial metals, but a fall in copper stocks limited losses.
Nickel, much of which goes into making stainless steel, also fell sharply as Chinese iron ore and steel futures tumbled and a rise in stocks pointed to ample supply.
Copper demand is, however, less dependent on Chinese economic stimulus measures than steel, said Julius Baer analyst Carsten Menke. "This is a sentiment-driven correction rather than a fundamentals-driven correction," he said.
LME COPPER: Copper on the London Metal Exchange was down 0.6 percent at $5,680 a tonne in official rings, having fallen to $5,635.50 earlier in the session. "Expect rallies into $5,690-5,710 to be sold first time around," brokers Marex Spectron said in a note.
COPPER STOCKS: Traders said prices were supported by a 18,825-tonne fall in on-warrant copper stocks available to the market at LME-registered warehouses. On-warrant stocks have declined by 28 percent to 176,225 tonnes from a high of 243,300 tonnes on May 4.
COPPER TECHNICALS: Technical support was around $5,635-$5,660. "It needs to close below the $5,620 area to look lower again," said a copper trader.
CHINA DOWNGRADE: Moody's said it expected the financial strength of China's economy to erode in the coming years as growth slows and debt continues to rise. Global markets were muted.
CHINA STEEL: Chinese steel futures fell and iron ore tumbled 7 percent following the downgrade and on concerns over ample supply.
US PROPERTY: New US single-family home sales tumbled from near a 9-1/2-year high in April, but the housing recovery likely remains intact amid a tightening labour market.
LME NICKEL: Lower Chinese steel and iron ore prices and a surge in Chinese nickel ore imports from the Philippines drove LME nickel down 2.1 percent to $9,150 a tonne.
NICKEL STOCKS: Traders said a 4,128-tonne rise in on-warrant nickel at LME-registered warehouses to 269,808 tonnes helped drive prices down by signalling good supply.
NICKEL TECHNICALS: "Support at $9,150 is holding for now at least and has unearthed some short covering, rallies are to be sold today though," said Marex Spectron.
PRICES: Lead was down 0.1 percent to $2,094 a tonne, zinc was 0.9 percent lower at $2,635, tin lost 0.9 percent to $20,325 and aluminium gained 0.2 percent to $1,946.
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