--Comex July copper recently trades down 7.85 cents, or 2.5%, at
$3.017 a pound
--Futures dip below $3 a pound as China cash crunch raises
demand worry
--LME warehouse stockpiles hit decade high on Friday; more than
doubled in 2013
By Matt Day
NEW YORK--Copper futures slumped to the lowest price in almost
three years on Monday as worries about a continued credit squeeze
in China pushed investors to cash out of the metal.
The most actively traded copper contract, for July delivery,
recently traded down 7.85 cents, or 2.5%, at $3.017 a pound on the
Comex division of the New York Mercantile Exchange.
Chinese equities on Monday recorded the biggest slump in almost
four years on speculation the Chinese central bank may not take
decisive steps to ease a cash crunch gripping the country. The
People's Bank of China said banks needed to strengthen their
liquidity management, remarks analysts said were a sign that
Beijing was pushing the financial sector to sort out the credit
problem on its own.
China's liquidity squeeze, which late last week saw overnight
lending rates soar to highs of 30%, has added to jitters about the
health of the world's No. 2 economy. Manufacturing data released
last week showed the sector shrank this month.
China accounts for about 40% of global demand for copper, which
is used in everything from plumbing to smartphones.
"The outlook for Chinese demand in the short term is negative,"
Phillip Futures Investment Analyst Joyce Liu said, adding that
tight liquidity will mean higher costs for companies importing
copper into China.
Copper futures fell as low as $2.9875 a pound early Monday, the
lowest price since July 20, 2011. At their lows, copper futures
were down 18% this year, largely the result of slowing growth in
China and increasing global mine production.
Some buyers stepped in on Monday on the view that copper prices
had slumped to bargain territory, traders with RBC Capital Markets
said in a note, but "most are standing out of the way of the
freight train at the moment."
Chinese imports this year have been running sharply lower than
2012 levels, as Chinese buyers leaned on high domestic stockpiles
instead of buying from the global market. China's refined copper
imports in May fell 23% from a year earlier, according to customs
data released last week.
The amount of copper held in London Metal Exchange-monitored
warehouses hit the highest level in a decade on Friday, according
to exchange data, bolstering the view that supply was outstripping
demand. Warehouses hold 678,225 metric tons of copper, more than
double the 320,050 tons stored at the start of 2013.
Meanwhile, Freeport-McMoRan Copper & Gold Inc. (FCX) said on
Monday it resumed open-pit mining at its massive Grasberg mine in
Indonesia. Operations there were idled after an accident in May
killed 28 workers. The government, which had ordered the company to
suspend activities until investigations were complete, approved the
restart over the weekend, Freeport said.
Mining at Grasberg's underground operations will remain
suspended for further investigations, the company said, reducing
production by about 453 metric tons a day.
--Francesca Freeman and Clementine Wallop contributed to this
article.
Write to Matt Day at matt.day@dowjones.com
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