SHANGHAI, Mar. 6 (SMM) -- Global investors’ concern over global economic slowdown was triggered following announcement that China cut 2012 GDP growth target and that eurozone PMI slipped, which weighed on global base metal prices.
Chinese Premier Wen Jiabao revealed at government work report at the opening of the 11t National People's Congress on March 5th, China’s GDP growth target for 2012 was 7.5%, the lowest in 8 years. He added that Chinese government will strive to pursue economic growth largely based on domestic demand and service sector. China’s cut in GDP growth target, the first of its kind, negatively affect base metal market, but showed Chinese government’s resolution for industrial restructuring.
The US Department of Commerce announced that the US January factor orders were down 1.0% MoM, still better than economists’ expectation of a decline by 1.6% MoM. The US Institution of Supply and Management (ISM) announced that February PMI in service sector was 57.3%, better than market expectation. However, decline in the February composite PMI from the euro zone exceeded market expectation, sparking concern that economy in the euro zone may contract for the second consecutive quarter. Hit by negative economic data, financial market extended losses overnight. The Dow Jones Industrial Average index fell 15 points to 12,963 points, down 0.1%. The Standard and Poor 500 index fell by 5.3 points to 1,364 points, down 0.4% and Nasdaq Composite index fell 26 points to 2,950 points, down 0.9%.
Since China is the largest base metal consumer in the world, the lowest GDP growth target since 2004 triggered investors concern over metal demand prospective. In response, base metal prices largely closed with significant losses overnight. LME copper future for delivery in three months fell by USD 92/mt or 0.9% to close at USD 8,485/mt, LME aluminum futures slipped by USD 37/mt to close at USD 2,284/mt, LME lead futures dipped by USD 34/mt to finish at USD 2,155/mt, and LME zinc futures tumbled by USD 28/mt to settle at USD 2,090/mt. At present, market is obsessed by concern over waning demand for physical base metal and slow consumption of base metal in China. In addition, the contraction of business activities in euro zone in Feburuary also exerts downward pressure on base metal market. Therefore, SMM expects that Shanghai base metal prices will continue to fall in the foreseeable future.