Aluminium, copper sink on disquiet over China COVID cases

14th December 2022 By: Reuters

LONDON - Prices of aluminium, copper and other industrial metals faltered on Wednesday on concern about surging Covid cases in top metals consumer China after it relaxed strict controls.

Three-month aluminium on the London Metal Exchange dropped 1% to $2 436.50/t by 11:20 GMT, paring gains of 2% in the previous session.

LME copper dipped 0.1% to $8 487/t after having hit its highest since June 23 on Tuesday.

"The situation in China regarding Covid is still pretty unclear," said Geordie Wilkes, head of research at Sucden Financial.

"It's getting clearer in terms of their approach to Covid, but what we're seeing is a strong divergence between sentiment and actual fundamentals on the ground."

A week after China began dismantling its tough 'zero-Covid' controls, the World Health Organization warned of "very tough" times ahead and state media reported some seriously ill patients at hospitals in Beijing, raising fears of a wave of infections.

Declining physical premiums for copper suggest weaker demand, said Soni Kumari, a commodity strategist at ANZ Research.

The Yangshan copper premium has slid to $55.50/t, the weakest since June, from $152.50 in October.

Investors were also nervous ahead of a meeting of the US Federal Reserve, which is expected to slow the pace of interest rate hikes.

"There are still large clouds overhanging the market. Whether the market is fully pricing in tighter monetary policy and whether there's the prospect for stagflation is yet to be seen," Wilkes said.

Cushioning losses was a softer dollar index after weaker than expected US inflation data, making commodities priced in the US currency cheaper for buyers using other currencies.

Among other metals, nickel dipped 0.4% to $28 180 a tonne, zinc shed 1.5% to $3 269.50, lead eased 2% to $2 162.50 and tin fell 1% to $24 400.