Worries over Chinese demand weigh on copper

LONDON — Copper prices eased on Wednesday due to worries about demand in top consumer China after a state planning official said there were increasing risks to growth in the second half of the year.

Benchmark copper on the London Metal Exchange (LME) ended down one% at $6,086 a ton. It touched a two-week high of $6,167 a ton on Tuesday.

“The warning about Chinese growth spooked the market and on top of that the dollar is up,” a copper trader said, adding that manufacturing surveys for China due later this week could trigger volatility.

The head of China’s National Development and Reform Commission said the government needed to step up efforts to achieve key development goals.

Amid an escalating trade dispute with Washington, China’s economy showed signs of further cooling last month with investment growth at a record low and consumers turning more cautious about spending.

A stronger US currency makes dollar-denominated commodities more expensive for non-US firms, potentially dampening demand. It is also a relationship used by funds to generate buy and sell signals using numerical models.

China’s official Purchasing Managers’ Index (PMI) due on Friday is expected to show a reading at 51 from 51.2 in July, according to a Reuters poll.

Canceled warrants or metal earmarked for delivery in warehouses registered with the LME have surged to a one-year high above 132,200 tons, nearly 50% of the total at 267,850 tons.

Cancelled warrants on Aug. 16 were below 25,000 tons. Traders say the canceled metal is heading for China as prices on the Shanghai Futures Exchange at around $7,150 a ton are much higher than on the LME and the gap is wide enough to cover shipping, taxes and make a profit.

Worries about LME market shortages have seen the discount for the cash over the three-month contract narrow to $12 a ton from $42 a ton on Aug. 15.

China is shipping unusually high volumes of alumina for a second time this year to an international market desperate for the ingredient used to make aluminum, traders and analysts said, even as domestic prices rise and put pressure on smelters.

Rising input costs such as alumina and energy helped the aluminum price hit a two-month high of $2,178 a ton earlier. It ended up 1.8% at $2,172.

Zinc fell 1.1% to $2,512, lead added 0.2% to $2,087, tin eased 0.6% to $18,940 and nickel slid 1.3% to $13,500 a ton. —