Weak China data pushes industrial metals prices lower

15 Jun, 2018

Prices of most base metals fell on Thursday after data pointed to a slowing of economic growth in China, the biggest metals consumer. Industrial output, investment and retail sales all grew less than expected in May, suggesting further weakness ahead if crackdowns on riskier lending and pollution continue.
Benchmark copper on the London Metal Exchange (LME) closed down 1.1 percent at $7,177 a tonne. It has slipped from a 4-1/2 year high of $7,348 reached last week on concerns that wage talks at the world's biggest copper mine could disrupt supply.
Also pressuring metals was an interest rate hike and a hawkish tone from the US Federal Reserve on Wednesday, said ABN AMRO analyst Casper Burgering.
Higher rates were likely to strengthen the dollar over time, making dollar-priced metals costlier for buyers with other currencies, and thus dampening demand, he said.
"It's a combination of both factors - China and the Fed."
However, supply and demand fundamentals were still good for most industrial metals, with copper, aluminium and nickel, all of which have reached multi-year highs this year, likely to see further gains, he said.
The dollar strengthened sharply against the euro, helping push metals lower, after the European Central Bank said it would not raise interest rates before the middle of next year.
US President Donald Trump was due to unveil revisions to a tariff list targeting $50 billion of Chinese goods on Friday, reviving concerns of a trade war that could slow global growth and reduce demand for metals.
Support was at $7,170 and a break below this could cause prices to slide towards $7,085.
While slower Chinese growth suggested lower demand, China's output of 10 non-ferrous metals including copper, aluminium, lead, zinc and nickel rose 4.3 percent in May from a year earlier to 4.55 million tonnes. Aluminium production was up 1.5 percent at 2.79 million tonnes.
Output surged to a record level in May, which should support demand for steelmaking ingredients nickel and zinc.
However, production capacity could be curtailed as China expands a crackdown on polluting industry beyond smog-prone Beijing and surrounding cities.
Sumitomo Metal Mining, Japan's biggest nickel smelter, said a global nickel deficit would grow to 88,000 tonnes this year from 72,000 tonnes in 2017. The metal nonetheless reversed gains seen on Wednesday to finish 2.1 percent lower at $15,290 a tonne.
LME Aluminium ended down 0.8 percent at $2,256, zinc closed 0.9 percent lower at $3,187, lead fell 1.3 percent to $2,453 and tin finished flat at $20,880.
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