It been a rough start to the week as concerns grow about the China economy. Yesterday the Chinese stock market fell 5.3% and copper traded down to USD6,613 a reported 3- year low. LME copper stocks in warehouse rose to a 10 year high of 678,225Mt.
In China the banking system has fallen into a state of distrust with SIBOR (Shanghia interbank offered rate or the interest rates banks lend money to one another) jumping from 2% to 10.8% last Thursday. Whilst it is tempting to dismiss the Chinese banking system as irrelevant, it will have a flow on affect as lending to China local industry comes under pressure.
**** DJ China Concerns Drag Copper to Near-Three-Year Low ****
NEW YORK–Copper futures fell to the lowest level in almost three years Monday on worries about demand from top consumer China amid a credit squeeze and slowing growth there.
Chinese equities notched their biggest fall in almost four years Monday on concern that the central bank wouldn’t take fresh steps to ease a liquidity crunch that at one point last week pushed overnight lending rates to 30%. The squeeze has added to worries about the health of the world’s No. 2 economy, following recent reports that showed contracting manufacturing activity. “It just means less demand from China, and they’re the biggest buyer out there,” said Frank Lesh, a broker with FuturePath Trading. China accounts for about 40% of global copper consumption. Lending curbs could limit the amount of copper product manufacturers are able to import.
Also Monday, data showed London Metal Exchange copper stockpiles late last week hit a fresh decade high, bolstering the view that supply was outstripping demand. Warehouses hold 678,225 metric tons of copper, more than double the 320,050 tons stored at the start of 2013.