Copper Gets No Boost From Better Than Expected Chinese Data

Copper is trading below the psychological support level at $3.00 after taking a big fall last week, the red metal continued to drift lower, trading at 2.986 after the release of Chinese GDP data..Copper prices weakened in official trading on the London Metal Exchange on Monday as a fresh liquidity injection into China’s banking system failed to impress pessimistic traders.  During Asian trading, economists said China’s 200 billion yuan of extra liquidity via a standing lending facility to several joint stock commercial banks would have limited impact and market participants said they remained nervous about economic and trade data due on Tuesday.

Instead of an earlier predicted supply glut, the copper market will likely finish 2014 with a deficit of around 150,000 tons, said Edward Meir, an analyst at INTL FC Stone., in a presentation at the LME Metals Seminar in London. That forecast jibes with the International Copper Study Group’s revised outlook, which foresees demand lagging supply by 270,000 tons. Earlier this year, the ICSG predicted a 400,000 ton surplus. In theory, less supply should be good for prices. But analysts believe a slowdown in China, the world’s biggest copper consumer, will nevertheless weigh on the metal, and a surplus is only a matter of time. Add to that mix uncertain growth in Europe and Japan, and the outlook for copper becomes even gloomier.

In China, some of the metal stored in warehouses is already trickling onto the market in the wake of the discovery of a massive fraud at the port of Qingdao. The fraud has made it more difficult to use the supply there to obtain letters of credit, and increased the odds that the metal will change hands.

This morning the release of better than expected Chinese GDP numbers did little to support metals. China’s gross domestic product expanded the least since the first three months of 2009. Thirteen of 22 economists polled last week said China will seek expansion of about 7 percent in 2015, down from this year’s government target of 7.5 percent. Retail-sales growth slowed to 11.6 percent in September from a year earlier, down from 11.9 percent in August and versus an estimate for 11.7 percent. Factory production grew by 8 percent when economists predicted a 7.5 percent increase from a year earlier, up from 6.9 percent in the previous month.

In other metals on the LME, nickel fell for a second day. Zinc, lead and aluminum were little changed. Tin hadn’t traded. Silver gained 8 points on the strength of gold, and is trading at 17.362 while gold added $1.50 to exchange at 1246.20.