Copper falls as China cuts growth target to 7.5%

Copper fell around one per cent on Monday, undermined by news that China, the top copper consumer, had shaved its economic growth outlook for this year, and by concerns over Greece’s progress on completing a huge debt restructuring deal. 

Three-month copper on the London Metal Exchange fell 0.82 per cent to $8,510 a tonne from $8,580 by 1017 GMT, having risen nearly 13 per cent this year, buttressed by increased liquidity across markets as central banks try to spur growth. 

Chinese Premier Wen Jiabao cut his country’s growth target to 7.5 per cent for 2012, from the eight per cent set in the previous eight years, to give the economy room to slow if needed while the government carries out promised economic and welfare reforms ahead of a looming leadership transition.

“In many respects they’re readjusting market (expectations) away from the fixations on the eight per cent (growth) figure. They’re trying to engineer a soft landing and so far they’re on track,” said Credit Suisse analyst Tom Kendall. 

Looking ahead, Kendall said: “The market is in a wait-and-see mode. As far as Chinese real demand goes the level of activity hasn’t been that strong so we are going to be broadly (trading) sideways for a little while longer.”

Also, a concern for markets, euro zone services sector PMI data came in below expectations as nerves grew ahead of a Thursday-deadline for investors to voluntarily take part in Greece’s debt swap deal.

Austria’s chancellor told a local newspaper on Sunday that Greece’s second bailout may prove insufficient and a topping up of the euro zone’s permanent bailout fund cannot be ruled out. But money managers, including hedge funds and other large speculators, remain optimistic, raising their bullish bets in copper by 2,358 lots to 15,618 contracts in the week to February 28, as the price of the red metal rose.   

“It will be important for the sector to get some confirmation that the economic recovery continues. In this context, all eyes will be on US non-farm payrolls this Friday,” said Credit Suisse in a note. 

Optimistic 
Other analysts were more decidedly optimistic, betting that rising copper stockpiles in China suggest importers are positioning themselves for a recovery in demand rather an indication of sluggish consumption.

“We don’t see further big increases in Shanghai copper stocks because we're now coming into peak consumption season in China,” said Matt Fusarelli, analyst at AME Group.   

“We see structural tightness in the market, we see improving consumption not only in China but also in the West. The United States will add to copper demand and we see stabilisation in Europe,” he said. 

Recent data have showcased improvements in the US housing and labour markets, spurring expectations of increased US copper demand.

The Chinese economy has also been showing signs of recovery. China’s services sector ran at its fastest pace in four months in February, although well below its long-term trend, despite an uptick in new business growth to an eight-month high, according to HSBC’s survey of purchasing managers.

In other metals traded, aluminium fell 1.22 per cent to $2,299.50 a tonne from $2,328. The metal remains supported by recent smelter closures, although as LME stocks data shows, it is still in chronic oversupply.

In industry news, Saudi Arabian Mining Co (Maaden) and US-based Alcoa have signed a letter of intent for South Korea’s Hyundai Engineering and Construction to build an alumina refinery at their aluminium complex in Saudi Arabia.

Stainless-steel ingredient nickel fell 0.72 per cent to $19,310 a tonne from $19,450.