Copper extends retreat from record, China data helps steady market

LONDON: Copper prices extended their slide on Monday as speculators pulled back from a market that raced to record highs last week, but losses were cushioned by positive factory data from China.

Benchmark three-month copper on the London Metal Exchange tumbled as much as 5.6% during Asian trading, eventually paring the losses to $12,930 a metric ton by 1025 GMT, a fall of 1.7%.

“I’m still fundamentally constructive on copper, but what we saw last week was too much, too fast. Once we get this healthy shake-out of some of these speculative flows, the market should settle,” said Nitesh Shah, commodity strategist at WisdomTree.

Copper may keep dropping to around $12,000 in the short-term, he added.

On Thursday, LME copper spiked 11% to a record peak of $14,527.50, fuelled by bullish speculators and funds after warnings by analysts that the sharp gains were not fully supported by supply/demand fundamentals.

Despite the retreat, LME copper is still up 33% over the past six months and there is still concern about mine disruptions causing deficits this year.

A large portion of the speculative buying originated in China, where the reversal has been dramatic.

The most-active copper contract on the Shanghai Futures Exchange hit the lower price limit on Monday, slumping 9% to close daytime trading at 98,580 yuan ($14,183.56) a ton, the lowest since January 9.

Three other SHFE metals, aluminium, nickel and tin, also hit limit down on Monday.

Data from top metals consumer China showing factory activity expanded at a faster pace in January helped calm the market, as export orders rebounded and output growth accelerated.

“I don’t think China is going to shoot the lights out in terms of economic growth this year, but I do think Chinese data will be decent,” Shah said.

The Yangshan copper premium, a gauge of Chinese consumers’ appetite for imported materials, rose to $27 a ton on Friday, but is still low compared to $55 in late December.

Copper has seen Chinese demand prospects weaken in the run-up to the nine-day Lunar New Year holiday starting February 15 and as industrial consumers baulked at high prices.

Among other metals, LME aluminium dropped 2.3% to $3,070.50 a ton, zinc shed 2.2% to $3,327, lead lost 1.8% to $1,972.50, nickel slid 5% to $17,060 and tin slumped 8.6% to $47,505.