Uncertain demand prospects undermine copper prices

22nd August 2022

By: Reuters


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Copper prices slipped on Monday as worries about demand dominated sentiment, though sliding inventories provided some support.

A manufacturing slowdown in top metals consumer China in recent months because of Covid-19 lockdowns has weakened demand for the metal used widely in the power and construction industries.

Economic troubles in the United States and in Europe are also undermining demand.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was down 0.8% at $8 011 a tonne by 0948 GMT.

"Globally, the macro side of things is dampening sentiment. Chinese economic data is weak and confidence is low," said Geordie Wilkes, analyst at trading firm Sucden Financial.

"Rate cuts in China are having a negative affect because it confirms fears that China's economy isn't performing well."

Also weighing on industrial metals are aggressive increases to interest rates by the US Federal Reserve. These have fuelled concern over US manufacturing and boosted the dollar, making dollar-priced commodities more expensive for buyers with other currencies. FRX/

Power problems in Europe and China, meanwhile, are expected to reduce metal production and support prices of energy-intensive aluminium and zinc. Read full storyRead full story

"Copper uses a lot less power; it is more resilient," Sucden's Wilkes said, adding that current copper prices are too high. "The next target for us is $7,800."

However, support for copper at about $7,990, the 50-day moving average, could slow losses, as could falling stocks MCUSTX-TOTAL in LME-approved warehouses.

Cancelled warrants - metal earmarked for delivery - at 40% of the total 122 575 tonnes also suggest that more copper will leave LME warehouses over coming days.

Concern about copper supplies in the LME system are behind the rising premium for cash metal over the three-month contract. The premium of $26.50 a tonne CMCU0-3 is its highest since May and compares with an $8 discount a week ago.

Elsewhere, aluminium CMAL3 was down 0.2% at $2 381 a tonne, zinc CMZN3 eased by 0.1% to $3 484, lead CMPB3 rose 0.2% to $2 046, tin CMSN3 slipped 1.8% to $24 350 and nickel CMNI3 was down 0.2% at $22 210.

Edited by Reuters


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