Copper sinks to lowest since 2009, losses reflect China gloom

Copper prices plummeted on Monday to their lowest in 6-1/2 years as large losses on Chinese equity markets reinforced tarnished prospects for growth and demand in the world's biggest consumer of industrial metals. Benchmark copper on the London Metal Exchange ended down 2.2 percent at $4,387 a tonne. The metal used in power and construction earlier touched $4,381, its lowest since May 2009.
Chinese markets have had a rough start to the year, buffeted by the falling yuan, two days of stock exchange suspensions last week and weak factory and service sector activity surveys. Chinese stocks ended more than 5 percent down after a 10 percent plunge last week, which triggered a global sell-off of riskier assets. "China's stock market and base metals are reflecting uncertainty about its economy," Cantor Fitzgerald analyst Asa Bridle said.
"Sentiment is the driver, there's no let-up. We can't see anything at the moment that will come to the rescue for metals." Mounting worries about demand can be seen in a report from the US Commodity Futures Trading Commission, showing money managers with larger bets on lower copper prices. A report quoting a top state adviser saying China will face great difficulty in achieving growth above 6.5 percent over 2016-2020 added to the gloom.
But analysts say the biggest problem for copper and other base metals is oversupply. Large output cuts by miners are needed to offset slower demand growth in China and move the market back towards balance. "Although it has fallen some way, copper has thus far been one of the more resilient commodities with the longer-term supply-demand dynamics perhaps more supportive than other metals," Investec analysts said in a note.
"But for now it appears there is no impending shortage and the demand side of the equation appears to continue to underperform." Chinese demand for metals ahead of the Lunar New Year holiday in February is expected to stay weak. Three-month aluminium fell 2.1 percent to $1,461 a tonne. The metal, used in transport and packaging, has had some support from New York-listed Alcoa's plans to close an aluminium smelter.
But traders say the amounts are small in an aluminium market estimated at more than 55 million tonnes last year and will do little to erode large surpluses. Zinc fell 1.7 percent to $1,482 a tonne, lead lost 1.2 percent to $1,601, tin slipped 0.5 percent to $13,675 and nickel was down 3.3 percent at $8,270.