Copper slid on Tuesday back towards the prior session's 5-1/2 year low on concerns over slowing growth and weak demand in top consumer China as well as rising metal inventories. Data showed China's factory profits grew at their weakest rate in two years in 2014 as economic growth slipped to a 24-year low, underscoring the challenges the country faces.
"Normally you see some pre-stocking (of metals) ahead of Chinese new year, but you're not even seeing that this year because traders just have no capital to put to work and they're still pretty nervous about underlying demand conditions," Colin Hamilton, head of commodities research at Macquarie, told a presentation to journalists. Three-month copper on the London Metal Exchange (LME) closed down 2.8 percent at $5,425 a tonne. The metal is down 14 percent so far in January, extending a combined 20 percent loss over the past two years. It hit a 5-1/2 year low of $5,339.50 a tonne on Monday. "The fall in copper is probably overdone," said Wood Mackenzie analyst Paul Benjamin.
"We're expecting a modest surplus this year of 200,000 to 300,000 tonnes. Any number of surprises can wipe that out - China's state grid could buy more copper than expected, its State Reserve Bureau might decide it's a good time to buy." Still, investors are for now focused on growing supplies and on weak Chinese demand.
Daily LME data showed copper stocks rose 1,375 tonnes to 238,225 tonnes, the highest level since April last year. Stocks are up by about a third since the start of the year. Mixed US data on Tuesday created more uncertainty, with durable goods orders falling for a fourth straight month but consumer confidence surging to a 7-1/2 year high. In other metals, aluminium ended down 1.3 percent at $1,855 a tonne. The metal has held up better than most, with a largely flat performance so far in January compared to losses in most other metals.
LME aluminium stocks are at their lowest level since April 2009, while Shanghai Futures Exchange stocks on Friday were near their lowest level since November 2011 at 186,000 tonnes. "Many market participants are interpreting this as a sign of tightness on the market. We blame primarily the difficult access to LME stocks and expect the new LME warehousing regulations to help ease the supply situation," Commerzbank said in a note.
Zinc closed 1.4 percent weaker at $2,105 a tonne, lead ended virtually flat, down 0.03 percent at $1,869.50, tin dropped 1.5 percent to finish at $19,305 while nickel edged up 0.3 percent to $14,800.
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