Copper prices dropped to their lowest level since late July in trading on the London Metal Exchange on Friday March 7.
The red metal was sold in big volumes at the opening of trading following news that China has witnessed its first ever corporate bond default.
After its two-year corporate bonds matured on Friday afternoon, Shanghai Chaori Solar said that it had only managed to pay a small portion of the 90 million yuan ($14.6 million) interest owed to investors.
The small solar cell manufacturer first warned that it was at risk of defaulting on its bonds a year ago, but at that time the state-owned underwriter of the bond, China Securities, announced that it would bail out investors.
The default on Friday was largely priced into the Chinese bond market, but the announcement knocked already-fragile confidence in the copper market further on Friday.
“Copper has borne the brunt of the pressure following this default, which is natural given the amount of unregulated financing that’s backed using copper as collateral,” a category I broker told Metal Bulletin.
The red metal sank to intraday lows below $6,914 per tonne on large volumes as the market opened in London, and then sold off further to hit a new low of $6,847 after the official session.
On an official basis, the three-month contract settled at $6,915/5.50 per tonne, down 1.7% from a day earlier.
The sell-off takes copper prices to their lowest level since July 31, when the red metal closed at $6,880 per tonne.
“It looks absolutely horrible on the charts right now; if it finishes down at these levels at 5pm then it really is goodnight Vienna,” the broker told Metal Bulletin.
“I don’t see why it would hold at these levels now; the move this morning has taken out a lot of support,” a second category I broker told Metal Bulletin.
Copper stocks in LME-approved warehouses stood at 269,000 tonnes, down 3,175 tonnes after significant withdrawals from Johor and Antwerp. The last 25 tonnes of copper stored in Trieste was also withdrawn.
The sell-off in copper came despite a massive easing in the dollar on Friday as tensions mounted in Ukraine. The euro bought $1.3902 as the officials got under way, up from $1.3753 a day earlier.
The sell-off hit all metals on Friday, with nickel retreating after a rally driven by the ongoing ban on nickel ore exports from Indonesia and concerns about refined supply from Russia as western leaders threatened to impose sanctions on the country in response to its actions in Ukraine.
Three-month nickel settled at $15,330/340 per tonne, down from the eleven-month high of $15,480/90 achieved on Thursday.
Nickel stocks in LME-approved warehouses stood at 270,624 tonnes, up 1,254 tonnes after a delivery into Johor.
Three-month aluminium settled at $1,770/71 per tonne, down from $1,774/75 a day earlier.
Aluminium stocks in LME warehouses stood at 5,293,200 tonnes, up 10,825 tonnes after a delivery into Johor.
Mark Burton
mburton@metalbulletin.com
Twitter: @mburtonmb