LONDON: Copper prices fell sharply on Wednesday as the dollar strengthened, and the slowing pace of the metal’s rally raised fears of a speculative sell-off.
The dollar touched its strongest since July, making metals pricier for buyers with other currencies.
Benchmark three-month copper on the London Metal Exchange (LME) was down 2.6% at $6,603 a tonne at 1605 GMT.
Prices of the metal used in power and construction have rallied more than 50% since March as industry recovered from coronavirus closures and speculators piled into the market.
The rising dollar, signs of slowing demand in top consumer China and a loss of momentum could encourage speculators to sell positions, knocking prices lower, said Saxo Bank strategist Ole Hansen.
A fall below $6,600 would be a powerful bearish signal, he said.
“It’s potentially time to sound a little bit of an alarm bell.”
US and euro zone manufacturing activity expanded strongly in September, but services disappointed as coronavirus cases increased and some countries reintroduced restrictions. Japan’s factory activity extended declines.
US equities fell.
On-warrant inventories in LME-registered warehouses are below 30,000 tonnes, from 250,000 tonnes in May.
But in China, Yangshan import premiums have halved to $55 since May and inventories in Shanghai Futures Exchange warehouses are at 193,347 tonnes from 99,971 tonnes in June.
“China’s industrial commodity appetite has clearly paused over the past month,” said Alastair Munro at brokers Marex Spectron.
Glencore said it would extend the life of a copper smelter and refinery in Australia, and that its Democratic Republic of Congo subsidiary Kamoto Copper Company should produce 270,000 tonnes of copper cathode in 2020.
Oversupply of lead and zinc increased in July, data from the International Lead and Zinc Study Group (ILZSG) showed.
China’s August imports of aluminium surged eight-fold from a year earlier as traders took advantage of lower overseas prices.
LME aluminium was 1% lower at $1,759.50 a tonne, zinc fell 2.2% to $2,409.50, nickel slipped 1.2% to $14,430, lead lost 0.3% to $1,879 and tin was down 3.1% at $17,690.
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