LONDON: Copper prices retreated on Tuesday as jitters about demand in top consumer China were reinforced by Chinese property giant Country Garden warning its ability to meet offshore debt obligations faced “significant challenges”.
China’s property market accounts for a large proportion of global industrial metals demand.
Benchmark copper on the London Metal Exchange (LME) traded 1.5% lower at $7,982.5 a metric ton in official rings. Prices of the metal used in the power and construction industries earlier touched a one-week high of $8,146 on Chinese buying after a week-long holiday.
Country Garden potentially joins a growing list of Chinese property developers that have defaulted, highlighting poor demand prospects for industrial metals.
Copper heads for the LME week with steep weekly decline
“Country Garden has added to concerns about China’s property market and Middle East tensions are creating uncertainty, people are cautious,” a metals trader said, adding that the market was increasing its short positions, or bets on lower prices.
Also weighing on LME copper prices are rising inventories in LME registered warehouses at 171,525 tons, up more than 200% since the middle of July and the highest since May last year.
Large flows of copper to LME warehouses have reinforced expectations of surpluses and created a discount for the cash over the three-month contract which last week climbed to 31-year highs.
According to the International Copper Study Group (ICSG), the global refined copper market swung to a surplus of 213,000 metric tons in the first six months of 2023 from a 196,000-ton deficit in the same period last year.
“The copper market is expected to be in surplus this year, and this is starting to show in visible stocks,” Macquarie analysts said. Macquarie forecasts a refined copper market surplus of 205,000 tons this year and 483,000 tons in 2024.
Overall, industrial metals gleaned support from a softer U.S. currency, which when it falls makes dollar-priced commodities cheaper for holders of other currencies.
Aluminium fell 0.5% to $2,229 a ton, zinc slid 2% to $2,463, lead was down 1.3% at $2,102, tin lost 1.7% to $24,700 and nickel retreated 1.9% to $18,575.