Copper Sinks as Two-Year High Stockpiles Reignite China Concern

Updated on
  • Bloomberg Industrial Metals sub-index trades near six-year low
  • Metals unable to `decouple' from Chinese equity plunge: Meir

Copper fell as stockpiles tracked by the London Metal Exchange climbed to the highest in almost two years, compounding demand concerns amid a sell-off in global commodities and equities in China, the world’s top metals consumer.

Inventories expanded 3.8 percent to 369,025 metric tons, the highest since December 2013 and the biggest gain in almost two months. In China, the Shanghai Composite Index posted the steepest five-day drop since 1996. Lower interest rates failed to halt a $5 trillion rout, signaling investors’ loss of confidence that the government will be able to reverse the slowdown in the Chinese economy. 

“Copper is leading the group down, aided in part by a large jump in LME stockpiles,” Edward Meir, an analyst at INTL FCStone Inc. in New York, wrote in a note. “Metals seem to be among the bigger losers today, unable to decouple as cleanly as some of the other markets have” from China’s rout, he said.

On the LME, copper for delivery in three months fell 2.6 percent to settle at $4,935 a ton ($2.24 a pound) at 5:51 p.m. in London. Prices touched a six-year low of $4,855 on Monday. On the Comex in New York, copper futures for December delivery slumped 2.8 percent to $2.235 a pound.

China consumes about 40 percent of the world’s copper and half its aluminum. The Bloomberg Industrial Metals Subindex is trading near the lowest since March 2009.

“People are starting to think that the Chinese government is really losing control over the economy,” Dan Smith, a senior adviser at Oxford Economics Ltd., said by phone. “The government has already done a lot to stimulate growth, and it hasn’t really had much of a response, which is concerning.”

Citigroup Inc. cut its 2016 copper forecast by 11 percent to $6,350, as it cited the deterioration in China’s fundamentals. It also and lowered its aluminum outlook.

Also in London, zinc lost as much as 3.7 percent to $1,673, the lowest since June 2010. Aluminum, tin, nickel and lead declined.

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