Copper prices fell to their lowest level in two weeks on Thursday amid growing concern over the outlook for metal demand from the property sector after a Chinese builder warned of a possible bond default. Three-month copper on the London Metal Exchange hit its weakest since July 2 at $7,030.25 a tonne in intraday trade, before paring losses. It failed to trade in closing open-outcry activity and was last bid at $7,065, down 0.2 percent.
China's Huatong Road & Bridge Group had said on Wednesday that it might not be able to repay a $65 million debt due next week, possibly becoming the first borrower to default in the country's largest bond market. Economic growth in China picked up slightly in the second quarter thanks to state stimulus measures, but analysts said Beijing needs to offer more support to meet its annual growth target in the face of a slowing property market.
China is the world's top copper consumer, accounting for about 40 percent of global demand. "This (news from Huatong Road & Bridge Group) reflects the ongoing concern that the (Chinese) housing market has been overinflated. The property sector could stay weak for some time, which would be a drag for copper," said Robin Bhar, an analyst at Societe Generale.
He expects copper demand to weaken this year and more supply to enter the market in the second half. In the latest sign of a rise in supplies, Anglo American reported higher copper and iron ore output for the first half of the year. The metal used in power and construction has fallen roughly 2 percent since it hit a 4-1/2 month high at $7,212 in early July after encouraging US labour market data and upbeat Chinese factory numbers.
"Some of the (copper) bears will be looking for excuses to sell and point to technical analysis that suggests prices may have gotten ahead of themselves There are a few things unsettling markets at the moment," said Joel Crane, of Morgan Stanley in Melbourne. In other metals, aluminium was up for the fifth consecutive session, lifted by supply concerns. The metal surged to a 16-month peak on Wednesday and added 0.9 percent on Thursday to close at $1,989 a tonne.
Aluminium stocks in LME-registered warehouses, which have fallen below 5 million tonnes, are down almost 9 percent since the start of the year. Bhar said the rally in aluminium may not be sustainable. "This rally is based on speculation, but the market is still oversupplied. It's not fundamentally as strong as ... other metals, and I expect prices to drift lower." Also keeping the market cautious, the United States imposed its most wide-ranging sanctions yet on Russian companies, including Gazprombank, Rosneft and other major banks and energy and defence companies. Safe-haven assets such as gold, yen and German bonds rose after the announcement. Nickel ended down 0.5 percent at $19,200; zinc was barely changed, down 0.04 percent at $2,302; and lead shed 0.7 percent to close at $2,190. Tin failed to trade in closing rings and was last bid at $22,100, up 0.1 percent.