Copper prices plunged to fresh six-year lows below $4,600 per tonne on Tuesday as technical dealings in Shanghai and worries about demand from China, the world’s top consumer, triggered another round of selling in London.
Shanghai prices sank over 4 per cent on track for its biggest one-day loss in four months, as selling accelerated mid-morning in Asia, leading London Metal Exchange (LME) benchmark prices lower and deeper into the market’s biggest rout in years.
The trigger was not immediately clear, but some traders attributed it to stop losses after prices in Shanghai pierced the 35,000 yuan mark, while others said it was a combination of relentless bearish news out of China.
On Monday, Chile’s Codelco offered customers in the world’s second-largest economy a more than 25 per cent drop in premiums for their contracts next year, the latest sign of the weakening long-term outlook for the industry.
Three-month copper on the LME fell 1.5 per cent to $4,620 a tonne, having earlier struck $4,593.50 — the lowest since May 2009 — and extending a 2.8 per cent loss from Thursday. Copper has fallen more than 8 per cent so far in November.
Shanghai Futures Exchange copper slid more than 4 per cent to 34,790 yuan ($5,458) a tonne.
“People are resetting expectations lower. They’re being disappointed in that there’s more China stimulus coming probably but it’s not going to be a spend-and-build package,’’ said Lachlan Shaw of UBS in Melbourne.
“The USD continues to remain strong. The market is now coming around to the idea of a liftoff in December,’’ said Shaw, referring to expectations of a hike in US interest rates next month.
“As long as the USD remains strong, it’s going to be tough for commodity prices.’’
In other metals, LME zinc teetered near six-year lows while in Shanghai, zinc was down 3 per cent.
Traders said the sell-off intensified in Shanghai after a break of some key levels — 35,000 yuan on copper, 10,000 yuan for aluminium and 71,000 yuan in nickel.
“It’s technical,’’ said one trader. “Certainly the premiums story helped.’’
Also reflecting ample supply, China bonded stocks copper stocks have climbed to 430,000 tonnes from 360,000 tonnes in late September, according to figures by consultancy CRU.