Copper slipped to a three-week low on Wednesday as worries about credit curbs on top consumer China's property developers fed into wider concerns about global demand for the metal. Three-month copper on the London Metal Exchange ended at $7,026 a tonne, its lowest level since February 5, and down from a close of $7,064.50 on Tuesday.
China accounts for more than 40 percent of global consumption of copper, which is used extensively in construction and power cables. Any curbs to financing and property development are likely to erode that demand. The official Shanghai Securities News reported on Monday that Industrial Bank and other banks may have stopped extending some loans to property developers and tightened lending to other property-related sectors, such as steel, cement and construction. "The market is very nervous, and any negative news coming out of China is having a significant impact on base metal prices," said Nic Brown, head of commodity research at Natixis.
China's corporate debt has hit record levels, and credit repayment problems are likely to rise, triggering restructurings and more defaults. The appeal of copper imports, often used to finance property investments, was also blunted by falling property prices, said Chunlan Li, an analyst at Beijing-based consultancy CRU. "Worries about risks to the Chinese economy are pushing prices down. At the same time, demand has not resumed after the holiday. Operating rates at end-users are still not very good," she said.
A metals broker in Hong Kong said traders were waiting on the sidelines, with more buying interest possible if prices touch $7,000 again. For now, traders have shown limited appetite for physical metal in China. Stockpiles have jumped because of record January imports, and premiums for metal in bonded warehouses fell by $5 this week to $160-$180, according to China price provider Shmet.
In other metals, zinc closed at $2,055 from a last bid of $2,045 on Tuesday, aluminium ended at $1,774 from $1,771 and lead closed at $2,135 from $2,120. Nickel closed at $14,210 from $14,300 and tin ended at $23,575 from $23,300, having earlier hit its highest level since early October at $23,650.
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