NEW YORK/LONDON (Reuters) – Copper crumbled to a four-month low on Monday as commodities slumped broadly on fears of a slowdown in global economic growth triggered by political deadlock in Greece and further signs of a struggling Chinese economy.
Most other metals also fell, with nickel sinking to a 2012 low below $17,000 a tonne, aluminum touching a 4-1/2-month floor, and tin and zinc each falling to their lowest levels in four months.
Copper closed below $8,000 per tonne for the first time in nearly a month, shedding more than 2 percent of its value and falling in line with other risk assets like crude oil and equities as Greece’s inability to form a government and concerns over a deepening Chinese slowdown presented a limited demand outlook for the industrial metal. <MKTS/GLOB>
“Risk-on assets in general are falling due to the fact that investors are starting to understand the reality of the fact that the global economy is going to slow, not grow, in the near future,” said Adam Sarhan, chief executive of Sarhan Capital.
London Metal Exchange (LME) three-month copper tumbled as far as $7,813 a tonne, its cheapest since January 12, before $178 or by 2.2 percent to close at $7,835 a tonne.
In New York, the July COMEX contract dropped 9.40 cents or 2.6 percent to settle at $3.5540, after moving from a four-month low at $3.5425 and $3.6745.
On Sunday, China cut bank reserve requirements to free up an estimated 400 billion yuan ($63.5 billion) for lending in a bid to avert a sudden slowdown in the world’s second-largest economy. [ID:nL4E8GC03Q] The move fed concern about global growth, already dampened by the political turmoil in Europe.
Also on Sunday, coalition talks in Greece faltered, increasing the chance of a new election in mid-June. An inconclusive vote on May 6 left the country’s political leaders divided on its 130 billion euro bailout, with neither side able to form a government.
“The euro zone remains in focus and the break below key support at $8,000 (a tonne) saw further liquidation in copper with the market still under heavy pressure from macro jitters and also following disappointing euro zone manufacturing output,” said VTB Capital analyst Andrey Kryuchenkov.
“The Chinese reserves cut provided very little support with the market largely ignoring it and hoping for a rate cut in the future instead.”
Data on Friday from the Commodity Futures Trading Commission (CFTC) continued to reflect an indecisive market, with longs rising by 1,500 lots and shorts adding 1,900 lots, resulting in a small net decline in the net long position.
An unexpected drop in euro zone industrial production March added to signs that the bloc is heading into recession, while Spain’s short-term debt costs rose at auction and its 10-year yields soared.
While demand prospects looked cloudy, copper’s supply-side situation remained tight.
Latest LME data showed copper stocks fell 2,975 tonnes to 218,300 tonnes, the lowest since Oct 2008 and equivalent to four days of global consumption.
This failed to lift copper prices, however, especially after the premium for cash copper over the three-month price narrowed to $37.50 at one point, from more than $110 last week – indicating nearby supply tightness could be easing.
NOT ABOUT LIQUIDITY
In China, investors were considering whether its move to cut bank reserve ratios was behind the curve, coming as it has after data last week showing the world’s No. 2 economy slowed further in April.
This followed the weakest first-quarter growth in nearly three years. Also last week, data showed China’s copper imports fell nearly 19 percent to an eight-month low, while its output of refined copper fell for the first time since January.
“It’s not about liquidity, it’s about real demand. So the liquidity improvement will not help because there’s simply no demand out there,” said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
In other metals, tin shed $425 to close at $20,050 a tonne, having hit a four-month low of $20,007 a tonne earlier.
Indonesia, the world’s largest tin exporter, plans to introduce new quotas to limit mineral exports, as well as a 20 percent duty on mineral exports by certain companies, Indonesian government officials said on Friday.
Aluminum ended off $20 at $2,025 a tonne, after hitting a 4-1/2 month floor of $2,019 a tonne earlier.
Russia’s UC RUSAL Plc <0486.HK>, the world’s biggest aluminum producer, posted an 84 percent drop in first-quarter net profit as prices fell, potentially fuelling a shareholder row over the company’s refusal to sell its stake in Norilsk Nickel <GMKN.MM>.