Copper steadies, but worries about oversupply weigh

Copper prices held steady on Wednesday but remained under pressure from worries about an oversupplied market and funds cutting bets on higher prices over coming days. Benchmark copper on the London Metal Exchange ended up 0.2 percent at $5,515 a tonne. That compares with the four-week low of $5,459 hit on Monday. Expectations of stronger global economic and demand growth have helped copper rise nearly 20 percent since October.
But much of that rise has been due to buying by funds jumping on a rising trend, which has stalled in recent days. That combined with forecasts of a surplus next year could see copper fall further, analysts and traders said. "Copper might drift lower over the next year. It shouldn't go below $4,500, below that is where you see supply leaving the market," said SP Angel analyst Sergey Raevskiy. "The floor should be $4,500-$5,000."
Key to copper demand and prices is China, which accounts for nearly half of global consumption estimated at around 22 million tonnes this year. Chinese demand has been stronger than expected in 2016 due to government stimulus, but analysts say the numbers should be treated with caution.
"You've seen demand from people in China worrying about the depreciation of their currency ... Copper is being used as a hedging instrument, it's not for consumption," Raevskiy said. "If we see the yuan depreciate further, it could help copper." The yuan has fallen more than five percent against the dollar since the middle of August. Also weighing on copper is a dwindling market deficit, which according to the International Copper Study Group (ICSG) fell to 29,000 tonnes in the January-September period from a deficit of 227,000 tonnes between January and June.
"This is because China has so far purchased significantly less copper on the world market in the second half of the year than it did in the first half," Commerzbank said in a note. "Given this, we see no justification for the steep rise in the copper price for a time from the end of October." Aluminium closed up 0.2 percent at $1,725 a tonne, zinc fell 0.6 percent to $2,620 and lead slid 0.6 percent to $2,182. Tin lost 0.1 percent at $20,905 and nickel ceded 0.6 percent to $10,860.