Copper Approaches Bear Market as China Slowdown Hurts Demand

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LME Copper Chart
LME Copper Chart

Copper fell to a six-year low in London, approaching a bear market, after manufacturing weakened in China, the world’s largest metals user. Aluminum also slid to the lowest since 2009.

A private Chinese factory gauge released on Monday fell to a two-year low in July and an official index on Saturday slipped to the weakest in five months, adding to a near-$4 trillion rout in Chinese stocks and declining car sales that are threatening economic growth. The country uses about 40 percent of the world’s copper and half its aluminum. In the U.S., manufacturing cooled in July from the highest level in five months.

“A lot of people got really paranoid after losing money in the Chinese stock market,” Peter Thomas, a senior vice president for metals at Zaner Group LLC in Chicago, said in a telephone interview. “As long as the mines are still producing and demand is still tapering off a bit, prices will remain under pressure.”

Commodity prices have slumped to the weakest level in 13 years as supply gluts emerged in everything from oil to metals and crops. Zinc joined aluminum, nickel, lead and tin in bear markets on Friday amid the slowdown in China. The Bloomberg Industrial Metals Subindex reached the lowest since April 2009.

Copper for delivery in three months fell 0.2 percent to settle at $5,220 a metric ton ($2.37 a pound) at 5:55 p.m. on the London Metal Exchange, after touching $5,142, the lowest since July 2009. A closing price of $5,184 would mark a drop of 20 percent from the May 5 peak, meeting the common definition of a bear market.

On the Comex in New York, futures for September delivery lost 0.7 percent to $2.346 a pound.

Nickel, Aluminum

“What we need to see now in the industrial metals market is what China is going to do in order to support growth over the coming years,” Nic Brown, the head of commodity research at Natixis SA in London, said by telephone.

Nickel led declines among industrial metals in London, sliding as much as 3.4 percent, while aluminum lost as much as 1 percent to $1,601.50 a ton, the lowest since July 2009. Lead, tin and zinc also declined on the LME.

“Copper could still go lower from here before it starts to pick up pace again,” Wayne Gordon, an analyst at UBS Group AG in Singapore, said in a Bloomberg Television interview on Monday. “We now are pushing that recovery out a little bit into the fourth quarter.”

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