By Chris Kelly and Maytaal Angel
NEW YORK/LONDON (Reuters) – Copper fell for the first time in four days on Monday, pressured by an early rally in the dollar versus the euro and by worries global growth may be slowing, which could hurt demand for industrial metals.
China, which accounts for 40 percent of the world’s copper demand, posted its largest trade deficit in at least a decade. That spurred worries of slower growth in the world’s second largest economy.
“This report, coupled with the other lower-than-expected economic reports from China in recent weeks is causing some concern about the health of the Chinese economy going forward, and more importantly, what the ramifications are for the global economy,” said Adam Sarhan, CEO of Sarhan Capital.
Also bearish was data confirming Italy was in recession.
London Metal Exchange (LME) three-month copper ended down $45 at $8,445 a tonne.
In New York, the May COMEX contract fell 2.10 cents to finish at $3.8375 per tonne, after dealing between $3.8170 and $3.8650.
Volumes were light at the start of the week as investors assessed mixed February trade figures from top consumer China and paused in front of Tuesday’s U.S. Federal Reserve policy meeting, which should give some clues about the course of U.S. monetary policy going ahead.
Copper volumes crossed 40,000 lots in late New York business, down more than 40 percent from the 30-day norm, according to preliminary Thomson Reuters data.
“The last time Bernanke spoke on February 29, gold and silver experienced a massive sell-off, so obviously the world is very focused on what the FOMC is going to do, and more importantly, if Bernanke adds any additional hints about QE3, to either confirm or dispel his last testimony,” Sarhan said.
Investors are wary about large copper stocks in Shanghai warehouses, where stocks rose to 224,781 tonnes last week, their highest since July 2002.
“Markets are still struggling for real conviction over (price) direction. In copper especially the market seems to still be focused on the demand side of the story,” said Macquarie analyst Duncan Hobbs.
Money managers, including hedge funds and other large speculators, reduced net longs in U.S. copper futures and options by 2,003 lots to 13,615 in the week ended March 6.
China’s copper imports remained surprisingly strong in February with inflows of the industrial metal up 17 percent from January and double a year earlier.
But many analysts fear the metal is piling up in warehouses, rather than being consumed.
Data on Friday showed China’s copper output in both January and February was the lowest since the first quarter of 2011 as demand for the metal was blunted by slower economic activity.
“We had slower GDP growth and slower copper consumption growth in China this year, but we continue to expect the authorities are certainly going to do as much as they can to prevent a sharp downturn,” said Caroline Bain, economist at the Economist Intelligence Unit.
Also weighing on prices was an early rally in the dollar. A stronger dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.
But the dollar pared its gains ahead of the Fed meeting and the release of U.S. retail sales data. <USD/>