London copper erased early gains to trade lower on Tuesday and below four-week highs hit in the previous session as renewed worries over China’s beleaguered property sector crimped relief over easing measures announced at the weekend.
China’s weekend stimulus was targeted to support its service sector rather than commodity-intensive industries, and falling land sales flag a potential slowdown in construction in the second half that could drag on metals demand, said analyst Lachlan Shaw of UBS in Melbourne, CNBC reported.
“It does give us a little bit more comfort in terms of infrastructure spending lifting this year, but ... it won’t allay a retrenchment under way in property construction,” he said, forecasting commodity demand would be flat to lower this year.
Three-month copper on the London Metal Exchange shed small gains to fall 0.5 percent to $5,950 a ton by 0744 GMT. It lost 1.2 percent on Monday after hitting a four-week top of $6,173.
Reflecting better supplies of metal, the premium for benchmark copper has weakened against the front month contract to $5.75, near the lowest since last August, on expectations of higher inventories and index funds rolling over contracts.
The most traded June copper contract on the Shanghai Futures Exchange fell 1 percent to 43,370 yuan ($6,994) a ton.
Property Speculation
Property speculation has been a driving force behind China’s copper imports in the past few years when metal was held as collateral for loans. Property bankruptcies raise jitters that copper stocks may be sold to recoup costs.
Troubled Kaisa Group on Monday became the first Chinese property developer to default on its dollar bonds when it confirmed it had failed to pay a coupon on two senior notes.
Among other metals, LME tin rallied 2.8 percent to $14,960 a ton, paring this month’s steep losses to 10 percent. Prices have been hurt by persistently weak electronics demand and ample supply as Myanmar steps up exports.
Holders of aluminum inventories also faced more pain. As well as grappling with sliding premiums, the cost of holding aluminum for a day ballooned to $9 while the cash to three-month spread jumped to $19.25 this week, the most expensive since December.
Premiums, or delivery surcharges, for physical aluminum in Europe have spiraled down by nearly half, raising the prospect of losses for buyers, although it is good news for industrial consumers such as can makers.
