- LME copper set to end year with a 25% gain.
- Copper vulnerable to correction after speculative buying.
- Aluminium the top performer on Shanghai exchange.
LONDON/HANOI: Copper fell on Thursday with investors wary about the scope for further gains in 2021 after it outperformed other industrial metals this year as China rebounded from the COVID-19 pandemic.
China may shift its economy next year towards consumers from metals-friendly infrastructure while buoyant levels of speculative buying leave copper exposed to a correction, analysts said.
The global drive to a green economy, however, is expected to provide underlying support for base metals that are key for electric vehicles and renewable energy.
"Metals have started a long-term bull market, there is not much doubt about that. But in the short term there are elements of overheating, so we remain on the sell side," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"When the correction kicks in, it will be deep."
Benchmark copper is set to be up 25% this year, finishing 2020 as the top gainer on the London Metal Exchange (LME), having touched its highest since 2013 at $8,028 a tonne this month.
That compared with a 21% rise for the LME index of six metals and a 3% rise for laggard battery metal lead.
Copper, widely used in power and construction, was 1.3% weaker on the LME at $7,742 by 1100 GMT.
Factory activity in China, the world's biggest metals consumer, expanded in December as hot export demand fuelled economic recovery after a coronavirus-induced slump, data showed on Thursday.
However, some analysts believe that China's wave of stimulus spending, which fuelled heavy imports of copper and other metals this year, could taper off in 2021.
"We expect that the metals-intensive Chinese credit cycle has likely peaked and the composition of China's growth will likely shift from export and investment in 2020 towards consumption in 2021," JP Morgan analyst Natasha Kaneva said in a note.
Copper may also need a pause after its sizzling rally, fuelled by speculators and funds, on the LME and CME, analysts said.
"Copper's record net CME/LME positioning as a percentage of total annual consumption has lifted prices to levels not supported by market fundamentals," Citi said in a commodity outlook note titled "Curb Your Enthusiasm".
All the LME metals were weaker on Thursday, with zinc down 1.5% at $2,742, having chalked up the No. 2 position in 2020 with a 21% gain.
Nickel was next with an advance of 19% this year to $16,675, while tin was 18% on the year at $20,205. Aluminium rose 10% this year to $1,985 a tonne and lead added 3% to $1,984.
On the Shanghai Futures Exchange, copper ended the year 17% higher and was the third-best performer behind aluminium and zinc, which gained 22.5% and 18% respectively.
The LME and the ShFE will be closed on Jan. 1 for the New Year holiday.