Copper drops to two-month low
By Leslie Hook in Beijing and Jack Farchy in London
Published: March 10 2011 18:49
Copper dropped to two-month lows on Thursday amid growing evidence of slackening demand in China, the largest consumer of the metal.
Imports by the country, whose share of global copper consumption has soared from 10 per cent to 40 per cent in little over a decade, dropped to their lowest in two years in February, according to customs data.
While the drop in imports is in part a reflection of the seasonal slowdown in activity during the Chinese New Year, it is also the result of weaker fundamentals in the physical market in China.
Inventories on the Shanghai Futures Exchange have risen by 70,000 tonnes since October, while stocks of metal in China’s bonded warehouses, for which import duties have not yet been paid, have risen to more than 600,000 tonnes, according to analysts and traders.
“China remains a strong buyer of copper but there is quite a lot of stock in bonded warehouses and speculators have spent the last six to 12 months accumulating material,” said David Thurtell, head of base metals research for Citi in Singapore.
The weakness in the Chinese market comes after the price of copper soared 55 per cent between July and mid-February to hit an all-time high of $10,190.
Most analysts and investors remain bullish on the long-term outlook for the metal. Mine output is barely growing and emerging markets consumption continues to rise.
Physical demand in China is set to be boosted by the huge urbanisation under way. As part of its new five-year plan, the government will build 36m units of social housing.
However, some believe copper is set for a prolonged period of weakness, arguing that high prices are pushing Chinese companies to run down copper inventories and reduce their consumption of the metal as much as possible.
China’s imports of other commodities, including iron ore, soyabeans and rubber, also fell in February because of the holidays and it being a shorter month. But the rate of oil imports rose to 5.2m barrels per day, compared with 5.13m b/d in January.
Imports by the country, whose share of global copper consumption has soared from 10 per cent to 40 per cent in little over a decade, dropped to their lowest in two years in February, according to customs data.
The benchmark copper futures price, for delivery in three months on the London Metal Exchange, fell 1.9 per cent to $9,115 a tonne, before ending at $9,220. The red metal is down 7 per cent since Monday.
While the drop in imports is in part a reflection of the seasonal slowdown in activity during the Chinese New Year, it is also the result of weaker fundamentals in the physical market in China.
Inventories on the Shanghai Futures Exchange have risen by 70,000 tonnes since October, while stocks of metal in China’s bonded warehouses, for which import duties have not yet been paid, have risen to more than 600,000 tonnes, according to analysts and traders.
“China remains a strong buyer of copper but there is quite a lot of stock in bonded warehouses and speculators have spent the last six to 12 months accumulating material,” said David Thurtell, head of base metals research for Citi in Singapore.The weakness in the Chinese market comes after the price of copper soared 55 per cent between July and mid-February to hit an all-time high of $10,190.
Most analysts and investors remain bullish on the long-term outlook for the metal. Mine output is barely growing and emerging markets consumption continues to rise.
Physical demand in China is set to be boosted by the huge urbanisation under way. As part of its new five-year plan, the government will build 36m units of social housing.
However, some believe copper is set for a prolonged period of weakness, arguing that high prices are pushing Chinese companies to run down copper inventories and reduce their consumption of the metal as much as possible.
China’s imports of other commodities, including iron ore, soyabeans and rubber, also fell in February because of the holidays and it being a shorter month. But the rate of oil imports rose to 5.2m barrels per day, compared with 5.13m b/d in January.
Copyright The Financial Times Limited 2011
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