Copper fell on Friday after strong Chinese economic data raised fears that government stimulus programmes in the top metals consumer are not sustainable, and as the market also looked ahead to a key meeting of oil producers. China posted its slowest economic growth since 2009, but a surge of new debt appears to be fuelling a recovery in factory activity, investment and household spending in the world's second-largest economy.
"The Chinese numbers were pretty good - the problem is that they were too good," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan. The data showed that Chinese banks extended 1.37 trillion yuan ($211.23 billion) in net new yuan loans in March, nearly double the previous month's lending. "The Chinese government cannot continue to rely on such a big injection of credit. People can see this dynamic as unsustainable and there is speculation that the yuan can see financial outflows because people are scared."
Three-month copper on the London Metal Exchange closed down 0.5 percent at $4,807.50 a tonne after ending little changed the previous session. Prices gained 3.4 percent for the week, the most since the week of March 4. Also weighing on markets was uncertainty ahead of the weekend's meeting of major oil exporters, who want to rein in ballooning global production. Oil prices fell in thin trade as analysts said the meeting would do little to help to clear global oversupply quickly.
Aluminium shed 0.3 percent to end at $1,555.50, also dented by uncertainty after China agreed on Thursday to scrap some export subsidies on a range of products, including aluminium. China's deal could flood a saturated global market with aluminium and steel products as producers scramble to sell excess metal ahead of the changes, prolonging the industry's pain, traders said. Chinese indicators, on the face of them, were encouraging for metals demand. Industrial output growth quickened to 6.8 percent in March, surprising analysts who had expected it to rise 5.9 percent on an annual basis.
The upbeat data encouraged some buying by commodity trading advisers, who run funds that largely rely on momentum signals, which for many metals were still bullish, Torlizzi said. Also offering some support was a weakening of the dollar index after US industrial production fell more than expected in March and consumer sentiment weakened. In other metals, LME zinc rose 0.3 percent to close at $1,872, lead finished 0.2 percent higher at $1,716, tin edged up 0.02 percent to $17,155, while nickel slipped 0.8 percent to end at $8,915.
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