LONDON: Copper prices extended their slide on Monday to a three-week low 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 5.6percent during Asian trading to the weakest price since January 9, eventually paring the losses to USD12,875 a metric ton by 1515 GMT, a fall of 2.2percent.
US Comex copper futures dropped 2percent to USD5.81 a lb after hitting their lowest price in nearly five weeks. “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 USD12,000 in the short term, he added. On Thursday, LME copper spiked 11percent to a record peak of USD14,527.50 a metric ton, fuelled by bullish speculators and funds after warnings by analysts that the sharp gains were not fully supported by supply and demand fundamentals.
Despite the retreat, LME copper is up 33percent 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 9percent to close daytime trading at 98,580 yuan (USD14,183.56) a ton, the lowest level since January 9.
Three other SHFE metals - aluminium, nickel and tin - also hit limit downs 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 USD39 a ton on Monday, but is still low compared to USD55 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.
LME aluminium dropped 2.4percent to USD3,070 a ton, zinc fell 2 percent to USD3,333, lead lost 2.2percent to USD1,964, nickel slid 6.4 percent to USD16,800 and tin slumped 9.2percent to USD47,155.
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