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Construction|Copper|Financial|Industrial|Power|Steel|Operations
construction|copper|financial|industrial|power|steel|operations

Copper pressured by poor demand prospects and higher supply

22nd May 2023

By: Reuters

  

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LONDON - Copper prices fell on Monday as the market focused on a deteriorating demand picture in top consumer China, rising supplies and climbing inventories in LME-approved warehouses.

Benchmark copper CMCU3 on the London Metal Exchange (LME) traded 1.2% down at $8,150.5 a tonne in official rings.

Prices of the metal used in the power and construction industries fell below the 200-day moving average on May 11 and have since traded in a narrow range.

"May is seasonally a slow month for industrial metals demand. Copper demand looks weak, orders from wire rod plants are poor," said Dan Smith, head of research at Amalgamated Metal Trading. "We are also seeing a pick-up in supplies."

China's CMOC recently reached an agreement on royalties with Democratic Republic of Congo's state miner, paving the way for copper exports to resume.

Copper production in Peru jumped in March as large mines resumed operations after stoppages caused by social protests.

Stocks of copper  in LME warehouses have risen by 80% since the middle of April to 92 250 tonnes. This has eased worries about supplies on the LME market and widened the discount for the cash contract over the three-month copper to about $50 a tonne.

Industrial metals prices are also being influenced by negotiations over the U.S. debt ceiling. Investors are concerned about the possibility of the US federal government falling behind on its debt payments, which could trigger a default and spark chaos in financial markets.

Elsewhere, zinc fell to 2-1/2-year lows of $2 426 a tonne. Prices of the metal used to galvanise steel for construction have dropped 30% over the past four months.

The sell-off was triggered by sliding activity in China, where new construction starts measured by floor area fell 21.2% year on year in the January-April period, having been 19.2% down in the first three months.

Edited by Reuters

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