Base metals fall on lower Chinese demand, weak global demand sentiment

Copper leads decline, sheds 1.2% on LME; US trade deficit concerns weigh

Copper-led base metals declined on Wednesday owing to the fluid economic conditions in the European Union, prompting the European Central Bank to announce stimulus measures. With falling economic sentiment, the demand for base metals is expected to remain subdued.

LME copper prices were trading lower by 1.2 per cent on Wednesday, as weak China economic data raised concerns regarding demand. Also, the US trade deficit unexpectedly widened in September as exports hit a five-month low, a sign that easing global demand could undercut economic growth in the fourth quarter. A decline in LME stocks by a little more than one per cent could not restrict the sharp fall in base metals. Other metals, too, followed suit and declined one-two per cent on Wednesday.

According to the  International Copper Study Group, refined copper production is likely to increase by 5.1 per cent to 22 million tonnes (mt) in 2014 and a further 4.3 per cent to 23 mt in 2015. From a deficit of 307,000 tonnes in 2014, the copper market is expected to see a surplus of 393,000 tonnes in 2015.

“We expect copper prices to trade lower as investors await results of a key meeting at the European Central Bank today (Wednesday). Also, faltering growth in China's services sector in October after new business cooled will act as a negative factor,” said Prathamesh Mallya, senior research analyst at Angel Commodities Broking.

Despite subdued copper prices, global copper smelters have not yet announced a production cut on a large scale, which indicates that miners are hopeful of a reversal in price trend with the recovery in the US economy.

Slowing demand from China, however, continued to remain a cause of concern.

According to the Lisbon-based International Lead and Zinc Study Group, the global zinc market deficit expanded to 234,000 tonnes in the first six months of 2014 from a surplus of 28,000 tonnes in the same period last year. Metals similarly fell in local markets.