Copper falls below $8,000 on China slowdown fear
Copper fell below $8,000 a metric ton (1.1023 tons) on Friday for the first time in three months, as below-forecast growth in China deepened concerns over the metal-consuming giant's appetite for raw materials.
Copper finished the week down 4 percent after China, which accounts for 40 percent of the world's copper demand, reported first-quarter growth of 8.1 percent, the weakest in almost three years and below market expectations for growth of 8.3 percent.
China's disappointing growth figures overshadowed news that investment bank JPMorgan (JPM.N) has filed to list a copper-backed exchange-traded fund (ETF) with NYSE Euronext.
Investors are still questioning China's ability to steer its economy into a "soft landing" and analysts have begun to question whether the copper market will remain as tight as it has been, with Shanghai copper inventories rising this year.
"We're still expecting a copper deficit for this year, but the probability of one diminishes every time we get negative data from China," said Bart Melek, head commodity strategist with TD Bank Financial Group.
London Metal Exchange (LME) three-month copper fell to a session trough of $7,964.25 a metric ton (1.1023 tons) , its lowest level since January 16, before ending the day down $230 at $7,990.
In New York, the May COMEX contract sank 9.35 cents or 2.5 percent to settle at $3.6270 per lb, after dealing between $3.6055 and $3.7225.
COMEX copper volumes kept sprinting higher, with nearly 100,000 lots traded late in New York -- more than two-thirds above the 30-day norm, according to preliminary Thomson Reuters data.
JPMorgan lodged a filing to list a copper-backed exchange-traded fund (ETF)with NYSE Euronext in the first sign for nearly a year that a new product may list.
The news of the filing took a backseat to the China growth numbers.
"China's Q1 GDP was lower than expected as well as Q1 home sales, adding to recently negative sentiment and renewed growth fears," VTB Capital analyst Andrey Kryuchenkov said.
"Anyhow, growth of over 8 percent is not that bad, just lower than expected. This will push the government to increase public spending. The focus is back on China at the moment, but really people should worry more about Europe."
The cost of insuring Spanish debt against default hit 500 basis points for the first time as fears about the high exposure of the country's banking sector to sovereign debt drove the price of credit default swaps higher.
Data on Friday showed Spanish banks borrowed a record 316.3 billion euros from the European Central Bank in March and markets fear much of the funds have been placed in domestic sovereign debt.
Adding pressure to base metals prices was a drop in the euro against the dollar after data showed U.S. consumer sentiment slipped modestly in early April.
A stronger U.S. currency makes dollar-priced commodities such as metals costlier for holders of other currencies.
Uncertainty about the global economy and sporadic demand from China are expected to keep copper prices soft this year, though analysts are slightly more optimistic than they were earlier this year, a Reuters poll showed.
The average forecast of 37 analysts in the survey, carried out in recent weeks, called for cash prices for copper to average $8,445 a metric ton (1.1023 tons) in 2012, rising to $8,818 in 2013.
"Copper demand in China has picked up slightly since the beginning of April as consumers came back to restock a little. But overall, demand remains weak and stocks are still too high," a Shanghai-based trader said.
Copper stocks in warehouses monitored by the Shanghai Futures Exchange have quadrupled since the beginning of the year.
China's demand for refined copper may not revive until September as current heavy stockpiles are depleted and Beijing takes steps to boost the cooling economy, analysts and sources at copper products manufacturing plants said on Thursday.
Tin shed $450 to end at $22,205 a metric ton (1.1023 tons) .