Reuters reported that London copper futures eased to hover near their lowest levels in almost three years on worries a liquidity crunch in main consumer China could curb its economic growth.

 

Concerns about a banking crisis in China and a scaling down of US monetary stimulus have hurt commodities with recent gains in the dollar piling additional pressure. Copper, a key indicator of industrial demand has fallen about 16% this year.

 

Three month copper on the London Metal Exchange hit an intraday high of USD 6,714.75 per tonne on bargain hunting before slipping to USD 6,660.00 by 0307 GMT down USD 10.00. Copper fell as much as 3% to USD 6,613 its weakest level since July 2010.

 

Mr Joyce Liu an investment analyst at Phillip Futures said that "The outlook doesn't appear too good because the Chinese government is not doing much. We have a double whammy from the US and from China. In China you have both slowing growth and the cash crunch which if prolonged will affect the copper market because it will jack up the financing cost of copper importers. All of base metals are pretty much abundant now because of the slowing global economy."

 

China accounts for around 40% of global refined copper demand. The most traded October copper contract on the Shanghai Futures Exchange dropped 1.4% to CNY 47,950 per tonne. China's central bank has engineered a tightening of cash in money markets as it tries to rein in excessive credit growth, especially in the lightly regulated shadow banking sector.

 

Chinese stocks extended losses even as money market rates fell back towards more normal levels as the central bank signalled a slight softening in its crackdown on easy credit by opting not to change the amount of cash in the market.

 

Asian shares slipped further on Tuesday as investors braced for more volatility in Chinese markets, while the dollar's rally paused after two top US Federal Reserve officials downplayed market fears of an imminent end to monetary stimulus.