Copper prices ended 2014 with a loss of 14 percent, their biggest annual decline in three years, on concerns that a supply surplus will hit the market next year just as Chinese economic growth shifts down another gear. Losses in copper, the most widely followed metal, were matched by tin and exceeded only by lead - a market that was in surplus in the year to September - while nickel was the best-performing metal thanks to Indonesia's ore export ban.
Year-end adjustments to market positions helped copper bounce off 4-1/2-year lows of $6,230 a tonne earlier this week, but it resumed its decline on Wednesday, ending down 0.41 percent on the day at $6,299 a tonne. Weighing on the metal this year, the global copper market is expected to record a surplus of about 390,000 tonnes in 2015, according to an industry group. That would follow five straight years of deficit.
There are also worries about demand in China, which consumes some 45 percent of the world's copper. Data on Wednesday showed activity in China's factory sector shrank for the first time in seven months in December, highlighting the urgency behind a series of surprise easing moves by Beijing in the past two months.
A top Chinese government think tank said this week that it expects economic growth in the country to slow to 7 percent next year from 7.3 percent this year. "Chinese construction demand is likely to be flat, China's State Grid Corp has indicated investment will be roughly flat for several years, and autos demand won't be significantly better next year. Therefore demand for 2015 could be underwhelming," Nomura analyst Patrick Jones said.
Still, copper could rally in the short term given expectations for a surplus have been priced in at a time when unexpected supply disruptions kept the market in deficit. Indicating nearby or physical supply is tight, cash copper for immediate delivery traded at a premium of $68 a tonne over the three-month futures contract on Wednesday, having been at a premium since July.
In other metals, lead ended down 1.56 percent at $1,857.50 a tonne, clocking losses of 16 percent this year as lower demand from China's electric bicycle sector helped keep the market in surplus in the first nine months. Nickel closed up 0.50 percent at $15,150 a tonne, gaining 9 percent for the year and exceeding gains of rival investor favourites aluminium and zinc - both markets which are expected to be in deficit next year.
Aluminium gained 3 percent for the year but ended down 0.22 percent on the day at $1,853 a tonne. Zinc was up 6 percent for the year, but ended the day down 0.37 percent at $2,178 a tonne. Tin lost 14 percent for the year, but ended up 0.15 percent on the day at $19,400 a tonne.