It had been quite a positive week on the LME over the past week with all metals trading in strong territory, although the market tends to lack some direction with China (the biggest consumer of metals) out of the market with its week long National Holiday. With markets and traders coming back from a week long break in China, latest news out of the London Metal Exchange has seen all metals (other than Cobalt – but I don’t think many of us have that to sell this week) fall in the first day of trade. Copper down USD166, Aluminium USD41, Lead USD22 & Nickel USD645. It was also interesting to note that in a report we receive daily from the Chinese markets, prices ended in almost exactly the same place as they were a week ago.
With the scrap steel price going from bad to worse on the back of its close relative Iron Ore, it leaves some of us somewhat perplexed as to the reason why Non-Ferrous metals have continued to trade so well for the past few months, seemingly flying in the face of the same market news the is putting pressure on the magnetic stuff! Is this overnight fall the start of something bigger, or just a slight correction to begin the week of trade?
I know we say it almost every week, but we will be keeping a close eye on markets to see what direction they take.
**** DJ BASE METALS: Comex Copper Hits Over-One-Week Low on China Worry **** By Matt Day
NEW YORK–Copper futures fell to a one-week low on Monday on worries about demand prospects for the industrial metal after the World Bank reduced its economic growth forecast for top metals consumer China. The World Bank on Monday said China’s economy would expand by 7.7% this year, down from the 8.2% growth previously expected. Worries about the pace of economic growth in China, set to slow this year amid weakening export markets to Europe and elsewhere, have kept pressure on copper prices this year.
China accounts for about 40% of copper consumption, making global prices sensitive to shifts in the outlook for the country. The metal, used widely in construction and manufacturing, is a key ingredient in China’s rapid growth during the last decade. Growth in Chinese demand has outstripped increases in world mine production, helping keep the global market tight and prices at historically high levels in recent years.
The World Bank’s cut, INTL FCStone analyst Edward Meir said in a note, was making the case that “the slowdown in China could get worse and last longer than expected.”
Also weighing on sentiment on Monday were lingering worries about Europe’s financial system with euro-zone finance ministers set to meet in Luxembourg to discuss Spain’s banking crisis and other issues. Global equity markets were mostly weaker, adding pressure to the copper market.
Copper had edged higher last week, gaining 0.5% in thin trade with Chinese markets closed for a weeklong holiday. Trading volume remained light on Monday. U.S. bond markets and government agencies were closed for the Columbus Day holiday, and Japanese markets were shut for a public holiday.