Copper hits five-week low

Copper sank to a five-week low on Wednesday, pressured by a strong dollar and data pointing to slowing growth in top metals consumer China. Three month copper on the London Metal Exchange, closed 1.2 percent lower at $6,970 a tonne. It hit a low of $6,951.75 a tonne in intraday trade, its lowest since June 30. Three-month nickel ended 1.7 percent higher at $18,725 a tonne, rebounding from earlier falls that had pushed the metal to its weakest level since June 25 at $18,256.
Eugen Weinberg, head of commodities research at Commerzbank, said selling pressure was not restricted to copper and nickel. "All metals today are under strong pressure due principally to two factors: weaker Asian markets, particularly Chinese, and a strong US dollar." The dollar held near an 11-month high against a basket of major currencies supported by positive US data and a sharp fall in Germany's industrial orders in June, which weakened the euro to its lowest since November.
A stronger US currency makes dollar-denominated commodities, including base metals, more costly for holders of other currencies. Data on Tuesday showed activity in the US services sector hit an 8-1/2 year high last month and factory orders surged in June, bolstering expectations of solid economic growth in the third quarter. Indications that growth in China's services sector had slowed weighed particularly on copper, which is used in construction and electrical goods.
Growth in China's services sector in July was at its lowest level in nearly nine years, a private sector survey showed on Tuesday, indicating a recovery in the broader economy is still fragile and may need further government support. On Monday the Chinese government reiterated that it would increase investment in areas including the property sector, while authorities will advance wide-ranging economic reforms such as changing the fiscal and pricing systems.
This plan to catalyse infrastructure investment in the second half may help offset the slowdown in the property sector, said Helen Lau, senior metals analyst at UOB-Kay Hian Securities in Hong Kong. "We should not be too bearish because the outlook for demand in the second half is good," Lau said. Trading sources said, however, that small importers of refined copper in China are likely to delay term shipments as local banks cut lending following a probe into an alleged metal financing scam. This could create extra supply in the international market, putting further pressure on the metal. Aluminium ended 0.6 percent higher at $2,025 a tonne, zinc closed 1 percent lower at $2,357.50 a tonne, lead ended 0.2 percent higher at $2,243 a tonne and tin closed 1 percent lower at $22,280 a tonne.