Copper forges lower on strong dollar, China woes

6th November 2015, Comments 0 comments

Copper sank this week on the strong dollar and demand concerns arising from weak Chinese and German data, despite production cutbacks.

Many commodities took a hit from the soaring dollar as the US Federal Reserve appeared to move closer to a December interest rate hike.

Copper tumbled Friday to $4,981 per tonne -- the lowest point since late September.

The dollar surged to a six-month euro peak as US jobs data strengthened the case for an early hike.

"Commodities on the whole are suffering since the US jobs report as a result of the surging dollar," said Craig Erlam, senior analyst at trading firm Oanda, adding copper was "still very much under pressure".

The euro slid on Friday to $1.0707 -- last seen in April -- after the Labor Department reported 271,000 net new jobs for October.

The stronger greenback makes dollar-denominated raw materials more expensive for buyers using weaker currencies, weighing on demand and prices.

UniCredit analysts added that "all metals have turned lower ... as markets interpreted Fed sentiment as somewhat more hawkish".

"With the door to a December rate lift-off open and, with it, the associated strength of the dollar, prices are likely to remain somewhat under pressure in the short term, we feel, with the industrial metals also suffering from weak macroeconomic data out of China in recent days."

Fed chief Janet Yellen declared Monday that if US economic activity remained solid the central bank could decide to increase rates before the end of 2015.

The demand outlook for copper also darkened in the face of poor data from both Asian powerhouse China and eurozone engine Germany.

China's manufacturing activity shrank again in October but the rate of decline slowed in the world's second largest economy, an independent survey showed Monday.

Media group Caixin's Purchasing Managers' Index (PMI), tracking activity in factories and workshops, came in at 48.3 last month, it said in a joint statement with survey compiler Markit.

It remained below the break-even point of 50 but marked the smallest contraction since June.

The sector is key to the health of the economy which is a major driver of global expansion, but has been showing shrinkage for the last eight months.

In another blow, official data showed that German industrial production decreased in September, weighed down by falling activity in the manufacturing and construction sectors.

Factory output contracted by 1.1 percent in September compared with a month earlier, after a 0.6-percent decline in August.

"There are real concerns about emerging market demand for copper and (the) German industrial output figures were another reminder that demand is softer and could remain weak," Erlam told AFP.

"While copper production is being cut to deal with the growing inventories, they are still on the rise which is also weighing on prices in the short-term."

The metal has also fallen heavily this week despite news of slashed production from Swiss mining giant Glencore.

In contrast, aluminium pushed higher following output cuts from US giant Alcoa.

By Friday on the London Metal Exchange, copper for delivery in three months stood at $5,012 a tonne from $5,119 a week earlier.

Three-month aluminium rose to $1,511 a tonne from $1,476.

Three-month lead dipped to $1,663 a tonne from $1,698.

Three-month tin slid to $14,600 a tonne from $14,975.

Three-month nickel decreased to $9,720 a tonne from $10,135.

Three-month zinc dipped to $1,666 a tonne from $1,687.

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© 2015 AFP

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