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Copper drops to two week low on China data

By Miles Johnson

Published: June 22 2009 11:24 | Last updated: June 22 2009 19:11

Copper prices dropped to a three-week low on Monday as investors took data showing record Chinese imports of the metal as evidence that yearly demand may have peaked.

Chinese imports of refined

rose to an all-time high for the fourth consecutive month in May, preliminary Chinese trade data showed, but domestic supplies of copper were used up at a slower rate.

The news pushed copper further below the $5,000 per tonne level as some in the market saw it as a strong indicator for a fall in Chinese copper imports over the second half of the year.

Estimated Chinese copper consumption dropped 3.5 per cent on the month, while imports rose to 337,230 tonnes of refined copper – a 6 per cent rise from April’s then record high of 317,947 and 258 per cent higher than the figure a year before.

"The first third of 2009 was distorted to some extent by a shortage of copper scrap and by strategic stockpiling," said Leon Westgate at Standard Bank. "We therefore expect imports to decline markedly over the summer months – hurting near-term sentiment".

"However, given that China is maintaining growth by boosting infrastructure spending – to help offset the impact of the global downturn on its export markets – a similar pattern to 2008 may emerge in 2009, with imports rising strongly after the summer hiatus. This should see demand, and prices pick up again towards the end of the year".

Chinese imports of refined aluminium fell 30 per cent from the record level seen in April, while estimated consumption dropped just 1 per cent due to a sharp rise in domestic production. Refined nickel imports into China reached an all-time high of 25,032 tonnes.

Copper prices on Monday fell 3.9 per cent to $4,755 a tonne, aluminium lost 5 per cent to $1,584 a tonne, while nickel dropped 3.3 per cent to $14,500 a tonne.

Oil slipped back well below

as a firmer dollar lessened crude’s lustre for investors using other currencies.

A new wave of attacks on oil installations in Nigeria, Africa’s largest exporter, and continued political unrest in Iran failed to anchor prices.

"Technicals are weakening and will start to put some [long positions] under pressure," said Olivier Jakob at Petromatrix, an oil consultancy. "Support will have to come from Nigeria, where attacks on the oil infrastructure have continued over the weekend. A proper global Nigerian damage assessment is still to be made and announced but we will not underestimate the Nigerian impact on sweet crude supplies."

Mr Jakob also noted that as futures contracts are for light, sweet oil, continued disruptions in Nigeria could cause the price gap between WTI futures and Brent, which is a light, relatively sweet oil, to lessen as Brent prices rise.

Nymex August West Texas Intermediate, the new US front month contract, shed $2.90 to $67.12. Nymex July WTI, on its last day before expiry, lost $2.87 to $66.68. ICE August Brent crude fell $2.58 to $66.60 a barrel.

Gold retreated 1.2 per cent to $920.70 a troy ounce, with dollar strength also contributing to downward pressure on the spot market price.

The Financial Times Limited 2009