The base metals sell-off continued on Thursday with copper sinking to a four-week low and zinc slipping below $3,000 a tonne.
Disappointing industrial data from China, the world’s biggest consumer of commodities, was the trigger for the latest flurry of selling.
Copper for delivery in three months on the London Metal Exchange fell 1.1 per cent to $6,482 a tonne, having earlier touched its lowest level in August.
Meanwhile, zinc lost $40 to $2,990 a tonne, aluminium eased $16 to $2,093 a tonne and nickel shed $90 to $11,345 a tonne.
“Chinese headline macro data for August was surprisingly weak with headline figures missing survey estimates and falling month-on-month,” said analysts at Liberum Securities.
“We had expected momentum to carry the economy for at least a month longer, given the strong PMIs and recent price action in commodities (implying at least speculation of growing demand).”
Chinese industrial production growth of 6 per cent year-of-year missed expectations of 6.6 per cent and declined from last month’s print of 6.4 per cent.
Many analysts have been calling for a pull back in metal prices following a breath-taking run.
The LME index, a gauge of major metals trading in London, surged 21 per cent from between the end of May and early September, on the back of a weaker US and dollar optimism about China.
Over that period speculators and hedge funds piled into metals. They saw the net long position in copper – the different between bullish and bearish bets – to a record high on both the LME and Comex, the US exchange.
Over the past week, those positions have started to roll over, contributing to a slide in prices. Copper has dropped 7 per cent since it came close to breaching $7,00 a tonne earlier this month.
Another fear stalking the copper market centres on rising stocks of the metal LME warehouses, although traders reckon this a move by a big metals merchant to flush out some of the hot money and speculative investors.
“Given the lofty price levels and extended investor position exhibited by many of the base and ferrous metals, this data should catalyse a continuation of the short-term technical correction that began in several markets last week, said Marcus Garvey, analyst at ICBC Standard Bank.
“In light of today’s data, we doubt that either discretionary investors or physical buyers will be quick to jump into a market that still holds the potential for significant liquidation,” he added.
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