China crackdown on prices subdues industrial metals

Copper prices rose on Tuesday due to expectations of robust demand and tight supplies and a weaker dollar, but worries about top consumer China's crackdown on prices of industrial materials subdued sentiment.

Benchmark copper on the London Metal Exchange traded up 0.1% at $9,961 a tonne in official rings.

Prices of the metal used widely in the power and construction industries have fallen 7% since hitting a record high at $10,747.50 a tonne earlier this month.

Much of the drop came after China raised margins for futures trading and transaction fees and introduced punishment for futures violations ranging from excessive speculation to spreading fake news.

"China's imminent policy target is to curb the pace of price rises and to give downstream sectors some breathing time, but not to kill the rally entirely," Citi analyst Max Layton said.

"But since most of these measures do not alter underlying supply/demand fundamentals, which are improving, we expect a renewed round of steady commodity price increases once the current knee-jerk price corrections run their course."

PLAN: China will strengthen commodity price controls in its 14th five-year plan from 2021 to 2025, making plans to cope with abnormal fluctuations in the prices of commodities, including iron ore, copper and corn.

DOLLAR: The dollar hit 4-1/2 month lows against a basket of currencies, as softer US data and insistence from Federal Reserve officials that policy would stay pat allayed investor fears about inflation forcing interest rates higher.

A lower US currency makes dollar-prices commodities cheaper for other holders of other currencies, which could boost demand.

TECHNICALS: Upside resistance for copper prices comes in at the 21-day moving average at $10,100, while a trendline and the 50-day moving average provide strong support at $9,400.

WARRANTS: Worries about copper supplies on the LME market have emerged after data from the exchange showed one company holding large amounts of warrants - title deed.

OTHER METALS: Aluminium was down 0.6% at $2,372.5 a tonne, zinc rose 0.3% to $2,958, lead gained 0.2% to $2,145.5, tin ceded 0.4% to $29,335 and nickel climbed 0.3% to $17,166.