LONDON: Copper prices rebounded on Tuesday as investors took advantage of a pull-back from two-year highs and as inventories continued to decline.
The market dropped 1.8% on Monday after touching the strongest levels since June 2018 early in the day on worries that a second wave of Covid-19 would result in lockdowns, hurting economic activity and metals demand.
“Some bargain hunters are coming in today. I think this sell-off was a bit overdone. Broad-based nationwide lockdowns are very unlikely because we have all realised that for the economy it’s unbearable,” said analyst Carsten Menke at Julius Baer in Zurich. “I think we’re in for some rangebound trading because markets are really torn between the strength of Chinese demand and the supply-side disruptions.”
Three-month copper on the London Metal Exchange (LME) had gained 1.3% to $6,779 a tonne by 1600 GMT.
It has surged by more than 50% since hitting 45-month lows in March, largely spurred by strong demand in top metals consumer China and worries about mine disruptions because of the pandemic.
“This morning Chinese buyers have been quietly picking up relatively cheap metal as they were never going to chase the market but just wait for an overdue correction,” Malcolm Freeman at Kingdom Futures said in a note.
Also supporting copper were low stocks. LME on-warrant copper inventories slid by 19% on Tuesday to 28,775 tonnes, their lowest since March 2019, having more than halved over the past two months.
Capping gains was a strong dollar index, which hit six-week highs as markets turned risk-averse over a surge in Covid-19 cases and new lockdown measures in Europe.
A strong dollar weighs on commodity prices because it makes greenback-denominated products expensive for buyers holding other currencies.
The global refined copper market showed a deficit of 192,000 tonnes in June, compared with 36,000 tonnes in May, data showed.
Aluminium edged down 0.2% to $1,776 a tonne, zinc gained 0.4% to $2,468.50, lead dipped 0.1% to $1,886.50, nickel was up 0.4% at $14,605 and tin advanced 0.8% to $18,240.
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