Copper falls after Moody’s downgrades China rating

LONDON — The copper price fell on Wednesday after Moody’s downgraded China’s credit ratings for the first time in 30 years, raising concerns about demand in the world’s largest consumer of industrial metals, but a drop in copper stockpiles limited losses.

Nickel, much of which goes into making stainless steel, also fell sharply as Chinese iron ore and steel futures tumbled and a rise in stockpiles pointed to ample supply.

Copper demand is, however, less dependent on Chinese economic stimulus measures than steel, said Julius Baer analyst Carsten Menke.

DRIVEN BY SENTIMENT

“This is a sentiment-driven correction rather than a fundamentals-driven correction,” he said.

Copper on the London Metal Exchange ( LME) closed down 0.60% at $ 5,682 a ton, having fallen to $5,635.50 earlier in the session.

Traders said prices were supported by a 18,825-ton fall in on warrant copper stocks available to the market at LME-registered warehouses.

On-warrant stocks have declined by 28% to 176,225 tons from a high of 243,300 tons on May 4.

Technical support was around $5,635-$5,660. “It needs to close below the $ 5,620 area to look lower again,” said one copper trader.

Moody’s said it expected the financial strength of China’s economy to erode in the coming years as growth slows and debt continues to rise.

Chinese steel futures fell and iron ore tumbled 7% following the downgrade and on concerns about ample supply.

New US single- family home sales tumbled from near a nineanda- half- year high in April, but the housing recovery likely remains intact amid a tightening labor market.

Lower Chinese steel and iron ore prices and a surge in Chinese nickel ore imports from the Philippines drove LME nickel to finish down 2.60% at $9,100 a ton.

Traders said a 4,128-ton rise in on-warrant nickel at LME registered warehouses to 269,808 tons helped drive prices down by signaling good supply.

The global zinc and lead markets fell into a deficit in March after surpluses in February, data from the International Lead and Zinc Study Group showed on Wednesday.

Among other industrial metals, lead closed down 1% at $2,076 a ton, zinc was 0.90% lower at $2,635, tin fell 0.60% to $20,375, while aluminum gained 0.10% to close at $1,945.