LONDON, Nov 15: Copper hovered near three-month lows on Friday on persistent worries about stimulus tapering in the United States and after data showed a slowdown in infrastructure spending in the Chinese power sector.
Copper, set for its biggest weekly drop since late August, falling below a three-month range this week as prolonged worries over the timing and scale of tapering crimped appetite for risk.
Three-month copper on the London Metal Exchange reversed early gains in Asian trading to shed 0.4 percent to $6,967 a tonne by 1009 GMT.
Prices, poised to fall around 3 percent for the week, were within reach of its trough from Thursday of $6,940 a tonne, the lowest since August 7.
While falling prices have largely met with solid consumer demand, leading indicators are not as positive, said analyst Gayle Berry at Barclays in London.
Chinese investment in its power grid, which accounts for about 40 percent of the country’s copper demand, fell by 14 percent in October, the second straight monthly decline.
‘The power grid data is a red flag, it appears to tell us that over the next three to six months we should see quite a sharp slowdown in Chinese copper consumption growth,’ Berry said.
‘There’s a divergence between what the leading indicators are telling us and what actual consumption is doing in China, which has been holding up quite strong.’
Near term indicators for consumption are buoyant, said analyst Joel Crane of Morgan Stanley in Melbourne, pointing to industrial power consumption and auto output. ‘Prices are likely to eventually recover once this technical-based rout has run its course.’
The most-traded February copper contract on the Shanghai Futures Exchange marked a new three-month low, closing at 50,080 a tonne, down 0.87 percent.
Premiums for term shipments for copper to China are expected to be hammered out at an industry week in Shanghai next week. Miners will also be negotiating with smelters on processing charges.
SUPPLY RISK IN NICKEL
Nickel prices bucked the weaker trend and gained 0.5 percent to $13,717 a tonne amid an uncertain environment about supply.
Indonesia, which accounts for 20 percent of global nickel supply, has said it will ban exports of unprocessed ore in January while news emerged this week of a mine closure in Australia following an earthquake.
On Friday, Finnish nickel miner Talvivaara filed for a court-supervised overhaul without which it risked bankruptcy.
‘As every day goes by, that Indonesia export ban deadline gets closer and closer. For me that’s one of the biggest supply risks the industry is facing over the next few months,’ Berry said.
‘There’s a lot of scepticism within the industry about whether the ban will be fully implemented, but the risk is that perhaps the market is being a bit too complacent.’
PRICES
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin ($1 = 6.0922 Chinese yuan) (AGENCIES)
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