Copper fell below $8,000 a tonne on Friday as disappointing Chinese growth data deepened worries over slower demand from the world's top metals consumer, while a stronger dollar and concerns about the euro zone debt crisis added pressure.
Three-month copper on the London Metal Exchange (LME) fell to a session low of $7,964.25, its lowest level since January 16. It ended at $7,990 a tonne, down 3 percent from a close of $8,220 on Thursday. The metal used in power and construction was also on course for a 4 percent fall this week.
China's economy grew at its slowest rate in nearly three years in the first quarter, with a weaker-than-expected reading that raised investor concerns a five-quarter slide has not bottomed and that more policy action will be needed to halt it. "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." Renewed concerns about the euro zone debt crisis rattled investors as the cost of buying protection in the credit default swaps market against a Spanish government debt default reached 500 basis points for the first time on Friday, due to fears about the high exposure of its banking sector to sovereign debt.
Adding pressure to base metals prices was a drop in the euro against the dollar after data showed US consumer sentiment slipped modestly in early April. A stronger US currency makes dollar-priced commodities such as metals costlier for holders of other currencies. Capping losses, however, was the hope that the Chinese government will step up its growth policies and inject more liquidity. Market players were also cheered by better-than-expected data in areas such as March industrial output and first-quarter fixed asset investment.
"Since industrial production and fixed assets investments remained relatively buoyant in March, and lending also increased substantially, China's economy is still not expected to suffer a hard landing," Commerzbank analysts said in a note. "Nevertheless, we do envisage it continuing to cool off, which should keep prices in check for the time being."
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 tonne 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 closed at $22,205 from $22,655 on Thursday.
Helping to put a cap on falls, Indonesia's finance minister said the country will issue a mining export tax regulation by June, showing the government is pushing ahead with a policy that is worrying resource firms. Zinc, used to galvanise steel, slipped to $1,984 from $2,040 Thursday's close. Lead ended at $2,065 from $2,098 and aluminium closed at $2,080 from $2,104. Nickel closed at $18,305 from $18,800.