Copper fell to its lowest since late June on Thursday on concerns about demand for the industrial metal after data showing euro zone economic growth ground to a halt in the second quarter and the Chinese property sector cooled. Germany's economy contracted by 0.2 percent on the quarter, undercutting Bundesbank forecasts. France fared little better, flatlining for the second successive quarter. With so much uncertainty surrounding Russia and Ukraine, a quick rebound is unlikely.
Three-month copper on the London Metal Exchange fell as low as $6,821 a tonne, its weakest since June 23. It closed at $6,825, down 0.9 percent from Wednesday's last bid price. "When you have contracting GDP data for the biggest economy of the euro zone, Germany, you will see more bearish bets than bullish," Naeem Aslam, chief market analyst at Ava Trade in Dublin, said. "Today's GDP numbers for France and for Germany are a big dent for economic growth in the euro region."
Euro zone industrial production also contracted unexpectedly in June. But Aslam added that the weak gross domestic product figures raised the prospect of more stimulus from major central banks to boost growth, which would lift demand for industrial metals. In the United States, the number of new claims for unemployment benefit rose more than expected last week, but will probably do little to change that view that the labour market was strengthening.
In China, the economy showed further signs of softening in July despite a burst of government stimulus measures, suggesting more policy support may be needed to keep growth on track as a property downturn worsens. New construction fell 12.8 percent in January-July as cash-strapped developers tried to clear huge inventories of unsold homes. But discounts and other sweeteners have failed to attract many buyers, who expect further price declines.
The property sector accounts for most of China's copper demand, in areas such as wiring and plumbing in the building of houses and in goods such as refrigerators and air conditioners. But a slowdown in lending and construction raises the chance China will step up monetary support which would in turn fuel commodities demand, UOB-Kay Hian Securities analyst Helen Lau said.
"I think the copper price correction is overdone," she added. Goldman Sachs said in a research note it was keeping a three-month and six-month price forecast unchanged at $6,600 a tonne, mainly due to expectations Chinese imports will fall. Improving Chinese smelting capacity will trim China's need to import refined copper by around 40,000 tonnes a month, Goldman Sachs said, raising the global supply of refined copper. Data from China's National Bureau of Statistics showed the country's refined copper production rose 1.6 percent month-on-month in July, increasing for a third straight month as smelters expanded capacity.
In industry news, Russian aluminium, nickel and copper exports to countries outside the Commonwealth of Independent States (CIS) declined in volume in the first six months of 2014, official customs data showed. Copper premiums in Europe slid to their lowest in more than a year this week, with slow demand and rising supplies building an overhang in a market that is expected to show a big surplus in the second half of the year.
In other metals, zinc hit a session low of $2,268, its lowest in more than a month, before closing at $2,275, down 0.4 percent, while aluminium hit a one-week low of $1,992, before closing down 1.4 percent at $1,997.50. Lead hit a session low of $2,200, a level last hit two weeks ago. It failed to trade at the close, and was bid at $2,200.50, down 0.9 percent. Tin closed 0.2 percent higher at $22,450 and nickel closed at $18,680, up 0.6 percent.