Copper heads towards six-week low as China holiday looms

LONDON: Copper prices fell towards six-week lows on Tuesday as funds cut bets on higher prices ahead of a seasonal demand lull during the Lunar New Year holiday in China, which accounts for 50% of global consumption.

Benchmark copper on the London Metal Exchange (LME) was down 0.8% at $7,739 a tonne by 1135 GMT. Prices of the industrial metal dropped to $7,705 last week, the lowest since Dec. 23.

"The Chinese holiday is a time when manufacturing and demand typically slow for a few weeks," said Quantitative Commodity Research analyst Peter Fertig.

However, China's attempts to curb COVID-19 infections are likely to put a damper on next month's Lunar New Year holiday, when hundreds of millions of people typically travel to their home towns.

Far fewer are expected to travel this year and many migrant workers have been asked to stay put, which could mean that industrial activity does not slow as much as in previous years.

DOLLAR: Weighing on industrial metals was the strength of the US currency, which makes dollar-priced commodities more expensive for holders of other currencies.

INVENTORIES: Copper stocks in LME-registered warehouses stand at 74,225 tonnes, close to last September's 15-year trough. Cancelled warrants - metal earmarked for delivery - account for 33% of the total, suggesting that more metal is due to leave.

Low stocks have fuelled concern about copper availability on the LME market, creating a premium for cash copper over the three-month contract. The premium currently stands at $7 a tonne.

TIN: Prices of the soldering metal were supported by worries about supplies from Myanmar after the country's military coup.

Stocks of tin in LME warehouses are another concern. At 790 tonnes, stocks are near the record lows of May 2019, helping to fuel the premium for cash tin over the three-month contract to a record above $1,000 a tonne.

Three-month tin was up 1.3% at $23,400, having touched its highest since June 2014 at $23,435.

OTHER METALS: Aluminium was down 0.3% at $1,963 a tonne, zinc slipped 0.3% to $2,562, lead ceded 0.9% to $2,019 and nickel lost 0.3% to $17,805.