Copper prices retreat as China property market woes weigh

London copper prices fell on Tuesday as a liquidity crisis in the Chinese property market and energy shortage in top consumer China weighed on the demand outlook of the metal.

Three-month copper on the London Metal Exchange was down 0.3% at $9,608.50 a tonne, as of 0617 GMT, while the most-traded December copper contract on the Shanghai Futures Exchange advanced 0.7% to 70,540 yuan ($11,025.32) a tonne, tracking overnight gains in London.

Investors have been worried about a broadening liquidity crisis in China's property sector, with a string of offshore debt defaults, credit rating downgrades and sell-offs in some developers' shares and bonds in recent weeks.

The real estate sector accounts for a large share of copper consumption and China is the world's biggest user of the metal.

Energy shortages in China and electricity price hike in Europe also posed risks of reduced demand from metal users.

The copper market has not seen a large number of transactions, Huatai Futures said in a report, but added that they hold a neutral view towards copper prices.

Copper, which has been supported by low exchange warehouse inventories, rose on Monday on solid US and China economic data, as well as a $1-trillion US infrastructure bill that could boost metals demand and economic growth.

"We had the infrastructure bill passed on Monday and now we're retracing those gains. Prices didn't hold at $9,600, so there'll be more downside to go," a Singapore-based metals trader said, adding that China-based traders are leading the sell-off but only in thin volume.

Fundamentals

• LME aluminium fell 0.9% to $2,580.50 a tonne, zinc declined 0.9% to $3,243 a tonne and lead fell 0.6% to $2,350 a tonne.

• ShFE nickel rose 1.1% to 144,660 yuan a tonne, aluminium edged up 0.1% to 18,965 yuan a tonne, zinc climbed 0.5% to 23,020 yuan a tonne and tin increased 0.5% to 276,570 yuan a tonne.

• European automakers reeling from a global chip shortage have in recent days hastened to assure shareholders that shortages of magnesium are not, for now, a risk to their production plans.