Copper hit its lowest in 4-1/2 years on Monday, hurt by a rising dollar and uncertainty about demand from consuming giant China after the government unveiled a new export tax rebate for some copper products.
Three-month copper on the London Metal Exchange
(LME) did not trade at the close but was bid at $6,140 per tonne, down 1.8 percent, having earlier hit its lowest since June 2010 at $6,095.50.
The dollar traded at its highest since late 2005 against a basket of currencies <.DXY>. A strong dollar makes commodities priced in the greenback more expensive for holders of other currencies. [FRX/]
China introduced a new export tax rebate for some copper products in a move expected to increase copper product shipments by as much as tenfold.
“We’ve been arguing that the Chinese copper market has a much smaller deficit than people have been suggesting,” said Nic Brown, head of commodities research at Natixis in London.
He noted a large increase in China’s domestic smelting capacity, adding that high treatment and refining charges gave an incentive to smelters to maximize output.
“I’ve long argued that the products exported out of China will be competing directly with producers from the other parts of the world. If that then squeezes them out of the market you are effectively creating a surplus of the primary metal somewhere else,” he said.
Copper shed 14 percent in 2014, the biggest annual decline in three years, due to concerns that a supply surplus would hit the market next year just as Chinese growth shifts down.
Gianclaudio Torlizzi, a partner at T-Commodity, said a close below $6,200 would signal further near-term drops.
Commodity markets were also hurt by crude oil, which fell to a fresh 5-1/2-year low on worries about a surplus of global supplies and lackluster demand. [O/R]
Aluminum fell 0.74 percent to close at $1,818.50, having hit a seven-month low of $1,816, while nickelhit a ten-month low of $14,625, before turning higher on the day to close up 2.5 percent at $15,200.
Tin rose to its highest in nearly three weeks at $20,100, before paring gains to close up 0.6 percent at $19,495.
Zinc did not trade at the close but was bid at $2,184, down 1 percent. Lead closed at $1,845, down 1.3 percent.
Zhejiang Yaang Pipe Industry Co., Limited