SINGAPORE, Apr 23: London copper slipped on Tuesday back towards an 18-month low after China’s first economic report for the second quarter underscored fitful growth in its seasonally strongest period, fuelling demand concerns in the world’s top metals consumer.
Growth in China’s vast factory sector dipped in April as new export orders shrank, a preliminary survey of factory managers showed, suggesting the world’s second-largest economy still faces formidable global headwinds into the second quarter.
Three-month copper on the London Metal Exchange slipped back towards last week’s 18-month trough at $6,800 a tonne, hitting an intraday low of $6,847.50 a tonne, before steadying. It traded at $6,863 a tonne by 0310 GMT, down 1 percent on the day.
Copper closed last week down 5 percent for a loss of more than 13 percent this year.
The most-traded copper contract on the Shanghai Futures Exchange slipped 0.9 percent to 49,280 yuan ($8,000) a tonne, but was off a nearly three-year trough hit on Monday, at 48,970 yuan a tonne.
‘The HSBC is much lower than the market was expecting,’ said Natalie Rampolo of ANZ in Melbourne.
‘All the indicators are pretty negative in terms of the detail. It does appear to be following the official PMI trend, which is pointing to more of a tepid recovery in the second quarter for China,’ she said.
The flash HSBC Purchasing Managers’ Index for April fell to 50.5 in April from 51.6 in March but was still stronger than February’s reading of 50.4. China’s official PMI is due May 1.
‘It doesn’t bode well for copper prices. It will have a negative impact today. Having said that, we do find when prices reach around $6,500 to $6,600, there is a floor, so we’ll see increased buying from China,’ Rampolo added.
Metals got support from comments on Monday by European Central Bank policymakers stressing falling inflation and poor growth prospects in the euro zone that suggest the ECB may be leaning towards a further cut in its main refinancing rate.
LME zinc prices have failed to gather any upward momentum since falling to a 5-1/2-month low at $1,825 mid month.
‘The problem for zinc is the same as that afflicting other base metals: current market fundamentals and macroeconomic forecasts are simply not strong enough to encourage forward buying,’ broker Triland said in a note.
SPOT MARKET PREMIUMS
The premium for physical copper in China’s domestic market rose to the highest in ten months against the front month ShFE futures contract, the latest data showed, reflecting increased appetite for spot metal, given its decline.
‘I see value in copper below $6,800,’ a trader at a global trading house said. ‘(Copper) may fall in the short-term, but I think it is a buying opportunity for the medium-term rather than a time to put shorts in,’ he added.
($1=6.1826 Chinese yuan)
(AGENCIES)
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