Copper retreats on stronger dollar; tighter supply and China data limit losses

LONDON: Copper prices fell in London on Thursday amid the stronger dollar and signals of no U.S. rate cut in March, although tighter supply and positive data from top consumer China lent some support.

Three-month copper on the London Metal Exchange (LME) fell 0.9% to $8,532.5 per metric ton by 1112 GMT.

Copper was rising in the second half of January and even touched its one-month high on Wednesday of $8,704.5 before stumbling upon the U.S. Federal Reserve pushing back on the idea of an interest rate cut as soon as March.

This comment resulted in the stronger dollar, which makes dollar-priced metals more expensive for buyers using other currencies, and worsening prospects for the growth-dependent commodities.

However, copper, used in power and construction, is likely to find a price floor quickly as rising investment in the power grid in China helps to offset the country’s sluggish property sector, said Dan Smith, head of research at Amalgamated Metal Trading.

London copper eases ahead of Fed rate decision

“The sell-off is likely to be short-lived,” Smith said. “The trend is upwards for the next couple of months.”

A private-sector survey showed that China’s factory activity expanded in January and new export orders registered the first rise since June.

On the supply side, inflation hit miners in 2023, lifting costs by up to 40% and causing some producers to cut output or suspend new projects, ANZ said in a research. These cuts will also help to provide a floor for metals prices, it added.

Miner and trader Glencore reported lower copper and nickel production in 2023 and signaled a further decline in output this year.

LME aluminium declined 1.1% to $2,255 a ton after a 4.4% fall in January. On the technical front, the 21-day moving average supports it at $2,231.

Zinc fell 1.4% to $2,493, lead shed 0.5% to $2,148, tin dropped 1.2% to $25,915 and nickel lost 0.5% at $16,185.