[miningmx.com] — COPPER crashed below the psychological $8,000 a tonne level on Thursday to hit one-year lows as economic fears escalated after news of manufacturing contraction in top consumer China combined with a grim outlook for the US economy.
Other industrial metals followed, hitting 2011 lows.
Aluminium fell nearly 3% to touch $2,255 a tonne, zinc slid more than 4% to $1,987, lead ceded more than three percent to $2,145, tin tumbled 9% to $19,700 and nickel fell nearly 5% to $19,400 a tonne.
Benchmark copper tumbled more than 6% to hit $7,788 a tonne, its lowest since September 2010. A close near this level on the LME’s electronic trading system would be the biggest daily fall since May 2010.
The metal used in power and construction traded at $7,810 a tonne in official rings from $8,300 at the close on Wednesday.
It is down more than 20% since hitting a record high of $10,190 a tonne in February.
Fuelling the sell-off was news that China’s manufacturing sector contracted for a third consecutive month in September while a measure of inflation picked up, suggesting the world’s No.2 economy may not be able to provide much of a counterweight to flagging US and European growth.
“The Chinese PMI was quite weak for September and the Fed’s move last night didn’t go down terribly well,” said Dan Smith, analyst at Standard Chartered.
“As long as economic growth is slowing and there is no good news out there, I think things are going to remain pretty soft for base metals.”
The US Federal Reserve on Wednesday said it would sell $400bn of short-term Treasury bonds and buy the same amount of longer-term debt, its latest attempt to kickstart growth that slowed to a crawl over the first half of the year.
SIGNIFICANT RISKS
But the US central bank warned of significant risks to the already weak US economy.
The United States is the world’s second largest copper consumer, accounting for about 10% of global demand estimated at about 19 million tonnes this year. China is the world’s largest with a 40% share.
“Chinese demand just hasn’t been there, but with prices at these levels there’s a very good chance (China) will come back,” a metals trader said.
Traders have been watching copper inventories for signs of stronger demand. In LME approved warehouses they stand at about 466,000 tonnes, little changed now for a couple of months.
“The (base metal) sector remains driven by broader economic and sovereign debt concerns,” Credit Suisse Private Banking said in a note.
Equity and commodity markets have been battered in recent months by growing worries about a Greek debt default and contagion to other euro zone countries such as Ireland, Italy, Portugal and Spain.
The euro debt crisis has also hit the euro against the dollar, which has weighed on metals. A stronger US currency makes dollar-denominated metals more expensive for holders of other currencies.
Traders also cite contraction in the euro zone’s manufacturing sector as a reason for pessimism.
Three-month aluminium traded at $2,264 a tonne in official rings from $2,318 at the close on Wednesday, zinc at $2,000 from $2,076, lead was bid at $2,159.5 from $2,220, tin traded at $20,050 from $21,650 and nickel at $19,525 from $20,400 at the close on Wednesday.
