Copper prices tumbled on Tuesday, on course for their biggest daily loss in four months as disappointing trade numbers from top consumer China led funds to reverse their bets on higher prices. Benchmark copper on the London Metal Exchange closed down 2.6 percent at $4,868 a tonne. Last week, prices hit a four-month high of $5,059 a tonne.
Other base metals also fell, a move mirrored by a fall in mining stocks, which dragged the STOXX Europe 600 Basic Resources index down 9 percent. "This is a market that is rapidly outpacing fundamentals," said Barclays commodities analyst Dane Davis. "The pullback is a recognition of the fact that in China there is a lot of rhetoric about a stimulus package."
China's February trade performance was far worse than expected, with exports tumbling by the most in more than six years, days after leaders sought to reassure investors over the outlook for the world's second-largest economy. The country's copper imports were down 4.5 percent month on month at 420,000 tonnes, although they were up sharply from the same month last year.
Three-month aluminium fell 2.0 percent to close at $1,567, tin dropped 4.6 percent to $16,550 and zinc slid 2.8 percent to $1,760. Nickel tumbled 8.3 percent to end at $8,600, handing back some of its eye-catching 25 percent rebound from a 12 year low of $7,550 reached on February 11. Traders said nickel selling on the LME accelerated after prices of the metal on the Shanghai Futures Exchanges plunged six percent to "limit down" and trading was halted.
"It went up the most recently and it's come down the most today," a trader said. "Stainless demand is still weak and inventories are high." The outlook for metals will depend on China, where growth and demand for industrial materials has slowed. "Markets have previously speculated on a lift in Chinese commodity demand thanks to stimulus only to be disappointed when stimulus either hasn't happened or has impacted other sectors. This may yet happen this year too," UBS analysts Lachlan Shaw and Daniel Morgan said. Lead fell 2.7 percent to $1,819.5 a tonne.
The lead market is focusing on the availability of metal for nearby delivery and is looking at two large holdings of LME warrants, one between 30-39 percent and the other between 50-79 percent. The concern over nearby availability is highlighted by the $13 a tonne backwardation or premium for the cash contracts over the three-month future, the highest since April 2015.