Copper hovers above seven-week low, zinc slumps after inventory jump

16th August 2023 By: Reuters

Copper prices held above seven-week lows on Wednesday as a weaker dollar offered support while zinc dropped to its weakest in two months after a surge in inventories.

Three-month copper CMCU3 on the London Metal Exchange (LME) was down 0.1% at $8 192 per metric ton in official open-outcry trading, bouncing after retesting the seven-week low of $8 148.50 touched in the previous session.

LME copper has shed nearly 8% since hitting its strongest in more than a month at the start of August, with investors discouraged by the lack of strong stimulus in top metals consumer China.

"The biggest weight on the market right now is the huge disappointment in Chinese data," said WisdomTree commodities strategist Nitesh Shah.

"With today's home sales data looking weak, there are increasing signs that commodity intensive sectors are vulnerable."

Data on Wednesday showed China's new home prices fell for the first time this year in July, the latest downbeat data pointing to a rapid loss in broader economic momentum.

"We are making up to 200 yuan losses per ton we sell currently. And if the property woes continue and are exacerbated, we might see demand fall lower in the following months," said a copper rod producer in China.

The most-traded September copper contract on the Shanghai Futures Exchange SCFcv1 ended day-time trade 1.1% down at a five-week low of 67,550 yuan ($9,258.88) a ton.

Counteracting the weak data was a softer dollar index. A weaker US currency makes dollar-priced commodities less expensive for buyers using other currencies.

Zinc was the biggest loser on the LME, dropping 1.1% to $2 289 a ton after hitting a two-month low of $2 265.50.

Prices slumped after data showed zinc inventories in LME-registered warehouses have surged by 54% over two days to their highest in 17 months, highlighting a market surplus amid weak demand.