Copper dropped to the lowest level in more than eight months in New York as weaker-than-expected Chinese trade data and the yuan’s depreciation fueled concern that demand for industrial metals is slowing.
Chinese exports slid the most since 2009 last month and inflation slowed to a 13-month low amid declining producer prices, data showed over the weekend. The People’s Bank of China set the yuan reference rate0.18 percent lower, the weakest level since Dec. 3.
“Concerns over the state of China’s economy seem to be setting the tone with a poor Chinese export number weighing on sentiment this morning,” William Adams, an analyst at Fast Markets.com, said in a note today.
The contract for delivery in May fell 1.3 percent to $3.0435 a pound by 9:05 a.m. on the Comex in New York. The metal fell as much as 2.8 percent to $2.9955 a pound earlier, the lowest since June 25. Copper for delivery in three months fell 1.3 percent to $6,690.50 a metric ton on the London Metal Exchange.
Volumes on the Comex were 88 percent higher than the 100-day average for this time of the day, data compiled by Bloomberg show. Speculators switched from a net-long position in copper to a net-short holding of 2,567 contracts in the week ended March 4, U.S. Commodity Futures Trading Commission data show.
The falling yuan, which dropped the most since 2008 after the PBOC lowered the reference rate, makes it less attractive to use copper as collateral to get credit to finance other transactions. China is the biggest consumer of commodities from copper to iron ore and rubber.
“News this weekend and overnight price action should continue to see pressure on the metals,” Aneek Haq, an analyst at Exane BNP Paribas, said in a report today. “Further weakness in the renminbi overnight suggests to me the government is concerned.”
Unwrought copper and copper products imports by China were 380,000 tons in February, customs data show. This compares with a record 536,483 tons in January and 298,102 tons in the same period a year ago. Yuan depreciation, weakening demand from end users and rising domestic output of refined metal contributed to the the decline, Citigroup Inc. said.
“The key to watch moving forward is the arb becoming sufficient to incentivize exports, which we expect within the next couple of months, relieving much of the tightness in the LME market,” Ivan Szpakowski, an analyst at Citigroup, wrote in a report today.
Copper for immediate delivery has traded above the three-month contract since Dec. 9. Backwardation, when nearby metal is more expensive than longer-dated futures, usually signals limited supplies.
Inventories of the metal monitored by the LME, down 28 percent since the start of the year, slid 1.3 percent to 265,400 tons today, the lowest since Dec. 11, 2012, daily exchange figures showed. Orders to remove the metal from warehouses slid 2.8 percent to 130,750 tons.
Aluminum, zinc, nickel and lead declined on the LME. Tin was little changed.