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Shanghai metals slump as demand wanes
(China Daily)
Updated: 2008-12-05 07:52
Shanghai metals tumbled by their daily limits to multi-year lows yesterday, after London copper fell for the sixth day running, as demand woes continued to weigh on investor sentiment.
"Markets are focusing on demand. Within that, weakness in a couple of sectors - construction and motor vehicles - is a key negative for metals," said David Moore, commodities strategist at Commonwealth Bank in Sydney. "A turnaround in prices will depend very much on the economic environment. Maybe by the latter part of 2009 and into 2010, we could see a pick-up in demand and prices." Benchmark Shanghai copper had fallen by its 4 percent daily limit to 25,900 yuan, marking a four-year low. Aluminum sank 5 percent to hit a lifetime low of 11,240 yuan and zinc lost 4 percent to 9,165 yuan, both at their downside thresholds. On the London Metal Exchange, (by 0730 GMT), copper fell 2.2 percent to $3,371 a ton, while aluminum, which lost 4.7 percent on Wednesday, was off 0.6 percent at $1,610 and lead, which lost 10 percent overnight, gained 0.7 percent to $982. Metals prices on the domestic market are likely to fall further next week when China releases a slew of economic data, including trade and industrial output, which should reflect more weakness in the economy, said Peng Wensheng, economist at Barclays Capital in Hong Kong. "There is also this concern about too much stocks built up by Chinese firms earlier this year, when prices were rising, so now they are in a difficult period of consolidation," he said. "Those stocks were bought at high prices and are squeezing the profit margins of the enterprises." Elsewhere, interest rate decisions by the European Central Bank and the Bank of England yesterday as well as US non-farm payrolls numbers today are expected to drive sentiment in the next few days. Consumers have been scaling back purchases of industrial raw materials for months, leading to a surge in inventories in many metals, and traders said few in the market were willing or able to restock despite low prices, since potential buyers were hampered by tight credit and uncertain demand. LME zinc fell $8 to $1,132 a ton. "Zinc prices are very low and we have seen a lot of rationalization in zinc. Ultimately prices will improve, but for the time being, the extent of any price bounce will be constrained," said Commonwealth Bank's Moore. Agencies (For more biz stories, please visit Industries)
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