Copper falls as China property woes trigger demand fears

06 Oct, 2021

Copper prices in London slipped on Wednesday as demand worries grew over the possibility of more debt defaults by Chinese property developers.

Cash-strapped China Evergrande Group has soured risk sentiment on worries of a wider financial crisis and a potential drag on Chinese construction activities, which consume a large amount of metals.

"Fantasia Holdings Group was the latest Chinese developer to fall into crisis after failing to repay a maturing bond.

This adds to strains of the nation's heavily leveraged property firms following Evergrande's debt woes," ANZ analysts said in a note.

A firmer dollar, fuelled by nervousness that surging energy prices could spur inflation and interest rate hikes, also made greenback-priced metals more expensive to holders of other currencies.

Three-month copper on the London Metal Exchange fell 1.1% to $9,069 a tonne by 0620 GMT, aluminium eased 0.3% to $2,912.50 a tonne, nickel declined 0.4% to $18,055 a tonne while lead rose 0.4% to $2,161 a tonne.

Also adding pressure was an easing supply disruption threat in Peru, the world's second-biggest producer of mined copper.

Peru's government said on Tuesday it had reached an agreement with MMG Ltd's Las Bambas mine and a local community to avoid road blockades that have threatened production at the huge copper mine.

Trade was tepid as China is on holiday from Oct. 1-7.

Fundamentals

  • Brazilian miner Vale SA said on Tuesday the production of copper concentrate at its Salobo mine is suspended due to a fire affecting a conveyor belt.

  • LME cash nickel was at a $11.50 premium over the three-month contract , indicating tight nearby supplies as inventories fell in global exchange warehouses.

  • Nickel inventories in LME warehouses fell to 154,440 tonnes, the lowest since December 2019, while ShFE stockpiles of the metal hovered near their record low levels.

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