Copper slides to one-week low as stronger dollar triggers profit-taking

LONDON: Copper prices fell to a one-week low on Friday as a stronger dollar prompted profit-taking by funds and traders while negative sentiment was reinforced by an absence of Chinese buyers, traders said.

Benchmark copper on the London Metal Exchange was down 2.8percent at USD13,546 a metric ton at 1600 GMT from an earlier low at USD13,467.7. It hit USD14,196.5 a ton earlier this week, not far from the record high of USD14,527.50 hit in January.

Traders said Chinese copper buyers were sitting on the sidelines waiting for prices to drop as speculators unwind their long positions betting on higher prices. The dollar was set for its biggest weekly gain in more than two months as mounting inflationary pressures from higher energy prices fuelled bets on a Federal Reserve rate increase this year.

A stronger US currency makes dollar-priced metals more expensive for holders of other currencies, which could subdue demand. “Copper extended its retreat … as accelerating US inflation reduced the chance of rate cuts and a stronger dollar,” Britannia Global Markets said in a note.

“Copper prices near record highs have likely started to deter demand in China, with fabricators seeing orders weaken this month.” Fundamentally though, Chinese demand is healthy.

Copper stocks in warehouses monitored by the Shanghai Futures Exchange are falling and the Yangshan copper premium - a gauge of China’s appetite for importing copper - is up 260percent since February.

Elsewhere, focus is on disruptions to aluminium supplies from the Middle East due to the closure of the Strait of Hormuz after US-Israeli attacks on Iran. Middle Eastern producers account for 9percent of global smelting capacity.

Expectations of large deficits have created backwardations or premiums for nearby aluminium contracts against those with longer maturities.

The most widely watched is the premium for the cash contract over the three-month forward, which climbed to 19-year highs around USD84 a ton on Thursday. Three-month aluminium was down 2.6percent at USD3,563 a ton, zinc slipped 1.4percent to USD3,533, lead retreated 1.6percent to USD1,982, tin fell 4.7percent to USD52,100 and nickel ceded 2.2percent to USD18,475.