Lower-Than-Expected Chinese Growth Dents Copper Price
Source: Reuters, Chris Kelly and Pratima Desai (4/16/09)
"China's economy grew at its slowest pace on record in the first quarter. . .prompting investors to take profits."
Copper for three months delivery MCU3 on the London Metal Exchange closed at $4,729 a ton, down $90 from Wednesday's close.
China's economy grew at its slowest pace on record in the first quarter - 6.1% compared with forecasts of 6.3% and averages around 10% in previous years - prompting investors to take profits.
"China's buying in metals is not directly related to domestic consumption," said Mo Ahmadzadeh, president of Mitsui Bussan Commodities. "The reaction to the GDP is correct because the longer-term prognosis is not beneficial for metals."
The metal, used in power and construction, lost further ground after the U.S. Commerce Department said groundbreaking on new homes dropped 10.8% to a seasonally adjusted annual rate of 510,000 units.
The figure was the second lowest on records dating back to 1959, and was down from February's downwardly revised 572,000 units.
Tom Hartman, broker with Altavest Worldwide Trading in Mission Viejo, California did see a glimmer of hope in the dismal housing data.
"A lot of people have thought the housing market needed to get down below a half million seasonally adjusted starts before seeing a bottom and now that we're finally getting there maybe there's a little bit more light at the end of the tunnel," he said.
Copper prices rallied to six-month highs of $4,925 a ton in London and $2.2350/lb. in New York this week due in part to Chinese purchases and anticipation of an improvement in demand.
That expectation is still driving the market, said Michael Widmer, an analyst at BNP Paribas.
Canceled warrants - stock already tagged for delivery - rose to 66,275 tons on Wednesday from 57,525 the previous day.
Analysts say this material is probably heading for China given the price premium of about $150 to $200 a ton for copper in China over London Metal Exchange prices.
"Stocks have been falling, predominantly in Asian warehouses and in Singapore in particular, fueling speculation of ongoing reserve purchases in China," Commerzbank said in a note.