Copper prices falter on demand doubts and profit-taking

LONDON: Copper prices fell on Thursday as profit-taking on Federal Reserve policymakers' concern about US growth was reinforced by doubts over whether a recent price rally was justified by the fundamentals.

Benchmark copper on the London Metal Exchange (LME) was down 1.5% at $6,584.5 a tonne in official rings.

Prices of the metal used widely in the power and construction industries touched $6,707 on Wednesday, the highest level since June 2018 and a gain of more than 50% since economic activity stalled in March because of COVID-19 lockdowns.

"We've had a significant rally and we need to see if the fundamentals catch up with prices," said Dan Smith, managing director at Commodity Market analytics. "China is clearly quite strong; the problem would be weakness in the rest of the world."

SPREADS: Concern over suupply on the LME market have been fuelled by copper stocks in LME-registered warehouses at 13-year lows of 104,425 tonnes and cancelled warrants - metal earmarked for delivery - at 50% of the total.

This is why the cash copper contract has mostly traded at a premium over the three-month contract since early July. It ended at $13.80 a tonne on Wednesday.

FEDERAL RESERVE: Several Fed policymakers said that monetary policy may have to be eased further to nurse the US economy through the coronavirus crisis, minutes from last month's policy meeting showed.

DOLLAR: Also weighing on base metal was strength in the US currency, which makes dollar-denominated commodities more expensive for holders of other currencies and could subdue demand.

PMIs: Clues to future demand on industrial metals markets will come from surveys of purchasing managers at manufacturing companies around the world, specifically their order books.

CHINA: Data from China will come under particular scrutiny, given that the country accounts for about half of global consumption of industrial metals.

OTHER PRICES: Aluminium was down 0.1% at $1,791.5 a tonne, zinc slipped 0.6% to $2,488.5, lead fell 1.3% to $1,985, tin ceded 0.4% to $17,570 and nickel was down 0.1% at $14,707.