London copper drops to 6-year low; eyes worst week since Sept

London copper slid to its lowest in more than six years on Friday and was heading for its biggest weekly drop since September as deteriorating China demand growth continued to suffocate prices.

China’s switch away from an export-driven economy and towards domestic consumption has punished the prices of metals, which have fallen further as miners rush to lower production costs to preserve margins and stay in business.

But with emerging signs the US economy is picking up and Europe is stabilising, they may be finding a floor, said chief investment officer Jonathan Barratt of Ayers Alliance in Sydney.

“I think the drop in prices is overdone. The smart money is already moving in,’’ he said, referring to the jump in deal-making across the sector.

Commodity giant Glencore Plc has started to sell its stakes to Lomas Bayas copper operation in Chile and its Cobar copper mine in Australia.

Three-month copper on the London Metal Exchange was down 0.4 per cent at $4,802.50 a tonne by 0729 GMT. It fell to as low as $4,787.50, its weakest since July 2009.

The metal has lost nearly 4 per cent, the most since late September, and has shed almost a quarter of its value year-to-date.

January copper on the Shanghai Futures Exchange closed down 2.9 per cent at 36,230 yuan ($5,685) a tonne, after also falling to a six-year low of 36,170 yuan.

Credit activity in China’s financial system dropped to its lowest level in 15 months in October, highlighting the challenges the country faces as it seeks to juice investment to reinvigorate growth.

Shanghai aluminium fell below 10,000 yuan a tonne for the first time ever amid a domestic glut, but managed to close slightly above it at 10,150 yuan, up 0.5 per cent.

The world’s top aluminium maker, Rusal, confirmed the potential closure of 200,000 tonnes capacity, and said it expects China’s exports of semi-manufactured aluminium to fall.

“Aluminium capacity closures in China continued at a slow pace despite extremely low domestic aluminium prices and heavy losses due to regional authority subsidisation. We expect rapid closures early in 2016 with the onset of a new five year development plan,’’ it said.

China is expected to sell more aluminium onto world markets by offering its struggling smelters cheaper power prices to keep them operating, adding to growing trade tensions with rival producers in countries such as the United States and Russia.

Production cuts by miners will strengthen their hand next week when talks with China's powerful smelting industry on 2016 processing fees kick off in earnest in Shanghai.

Miners lost out this year after treatment and refining charges soared to the highest in a decade on bets that a boom-time driven supply flood would swing the market into a big surplus for the first time in half a decade.

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