LONDON: Copper prices slipped on Wednesday as funds locked in profits from a rally to record highs that has curbed industrial consumers’ appetite to buy the metal.
Three-month copper on the London Metal Exchange (LME) was 2.3% lower at $10,615 a metric ton at 1051 GMT, the biggest daily percentage drop in eight months.
Corrections lower are likely to be short-lived with many funds planning to return to long or bullish positions after they have sold some of them to realise profits, a trader said.
“I would be surprised if funds run away without a fight,” the trader added.
The LME copper price is still up 24% so far this year after a speculative frenzy propelled it to a historic high of $11,104.5 on Monday.
The high prices have choked off physical demand in top consumer China, with copper fabricators cutting production.
“We understand that more than 500,000 tons of unsold copper wire rod inventory has accumulated at producers since March,” BNP Paribas’ David Wilson said in a note on Tuesday.
Copper dragged off record high by subdued physical demand
Copper is used for making electrical wires and cables due to its good conductivity.
Copper inventory in warehouses monitored by the Shanghai Futures Exchange (SHFE) remained close to 300,000 tons, with seasonal withdrawals slower than usual.
China’s April refined copper output rose, easing concerns over major smelters’ plans to cut production announced in March.
Chinese copper sellers are paying their buyers to get rid of stocks, as the domestic premium turned negative, according to the Shanghai Metals Market.
The most-traded June copper contract on SHFE fell 1.1% to 86,220 yuan ($11,910.65) a ton.
The front-month U.S. futures contract on Comex dropped 2.5% to $4.99 per pound.
The U.S. dollar rose slightly, as the market waited for the publication of minutes from the Federal Reserve’s most recent policy meeting.
A stronger greenback makes dollar-priced commodities more expensive for holders of foreign currency.
LME aluminium fell 0.8% to $2,704.5 a ton, nickel dropped 2.5% to $20,780, zinc was down 1.1% at $3,104 and tin lost 0.8% to $34,050. Lead gained 0.6% to $2,349.50.
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