Copper futures in New York capped the biggest loss in more than two years asChina’s first onshore default stoked concern that rising debt will curb demand in the Asian nation, the world’s largest consumer.
After Shanghai Chaori Solar Energy Science & Technology Co. failed to pay full interest on its bonds, more defaults may follow, including by makers of nonferrous metals, said Qiu Xinhong, a bond-fund manager in Guangzhou at Golden Eagle Asset Management Co. Copper stockpiles monitored by the Shanghai Futures Exchange have climbed for eight straight weeks, the longest streak in two years, adding to signs of slowing use.
Prices have lost 9.2 percent this year, the most among 34 commodities tracked by Bloomberg, as signs of faltering growth in China boosted the outlook for a surplus. Global production will outpace demand by 81,000 metric tons in 2014, after a deficit of 175,000 tons last year, Barclays Plc said Feb. 12. Shares of Freeport-McMoRan Copper & Gold Inc. (FCX), the biggest publicly traded producer, fell as much as 4.8 percent today.
“You have a lot of fear in the market right now,” Tom Power, a senior market strategist at RJO Futures inChicago, said in a telephone interview. “The potential for more default is really what’s pushing the market. The market seems to be poised for another move lower.”
Copper futures for delivery in May slid 4.2 percent to settle at $3.0825 a pound at 1:25 p.m. on the Comex in New York, the biggest drop since December 2011.
Stockpiles tracked by the Shanghai Futures Exchange gained 4.6 percent to 207,320 tons this week, the highest in 10 months.
The Chinese economy will probably expand 7.5 percent this year, the slowest since 1990, according to a Bloomberg survey of economists. While the nation’s copper imports reached an all-time high in January, the higher purchases probably reflected over-ordering and more metal being used for financing deals, rather than increased industrial demand, Goldman Sachs said Feb. 14.
“Copper is particularly exposed to Chinese issues due to palpably high local stocks and associated financing deals,” BNP Paribas SA strategists including Stephen Briggs, said in a report today.
On the London Metal Exchange, copper for delivery in three months fell 3.8 percent to $6,782 a ton ($3.08 a pound). Orders to remove the metal from LME warehouses slid to the lowest since April.
Aluminum, tin, lead, zinc and nickel also dropped in London.