Copper heads for weekly losses as the dollar leaps

LONDON: Copper prices fell to their lowest in nearly seven weeks on Friday as the dollar strengthened and demand in top consumer China remained weak.

The dollar leaped to a seven-week high, making metals costlier for buyers with other currencies, as strong US economic data and high inflation numbers raised expectations that US interest rates will remain higher for longer.

In China, copper inventories continued to increase - albeit at a slower pace than in recent weeks - and import premiums fell again, signalling lacklustre demand.

News that the United States will increase tariffs on more than 100 Russian metals, minerals and chemical products had little impact on prices on the London Metal Exchange (LME).

LME benchmark copper was down 2.1% at $8,718 a tonne at 1650 GMT after touching $8,705, the lowest since Jan. 9. It was down around 3% over the week.

Global stock markets tumbled towards their biggest weekly fall of the year.

Only a month ago, copper was on a high, with prices reaching $9,550.50 as the dollar weakened and speculators bet Chinese demand would recover from last year’s slump.

“The frustrating thing for those investors is that they’ve parked their money in copper and the fundamentals haven’t actually changed much,” said Liberum strategist Tom Price.

Yangshan premiums paid to import copper into China have plunged to $22.50 a tonne from $144.50 in early November. “What that tells you is that copper consumers (in China) are waiting for prices to fall back before they re-engage,” Price said.

He said fundamentals justified a price around $7,000 a tonne but that copper may not fall that low.

LME aluminium was down 2.4% at $2,338.50 a tonne, zinc fell 2.3% to $2,964.50, nickel dropped 2.8% to $24,655 and tin fell 2% to $25,650. Lead was up 1% at $2,078.

All were on course for weekly losses.

Analysts at Citi said tin should fall to $24,000 over the next three months “due to easing supply risks, sluggish physical demand, high inventories, and elevated investor net long positioning versus the rest of the base metals complex.