LONDON: Copper eased away from close to eight-year highs on Friday as doubts grew over how much infrastructure stimulus the new US administration will be able to deliver.
Three-month copper on the London Metal Exchange (LME) edged down 0.2% to $8,160 a tonne in official trading after touching $8,238 for its highest since February 2013 and the fourth straight day of similar peaks.
Metals markets surged on expectations of more stimulus spending, including US President-elect Joe Biden’s plan to spend $2 trillion on infrastructure, after the Democrats this week effectively gained control of both houses of Congress.
“I think the market was just looking for positive news and the outcome of Georgia elections fits, but from a fundamental point of view it doesn’t really change things,” said Carsten Menke, analyst at Julius Baer in Zurich.
Any impact on metals would not be felt for several years until infrastructure projects were rolled out and a very slim majority in the US Senate lessens the chance of pushing through a big programme, he added.
“Looking at copper positioning on the futures market, a lot of good news is already priced both in terms of the recovery outlook and expectations of a weakening US dollar.”
Prices are likely to pull back below $8,000 over the next three months, with $7,500 a fair value price, Menke said.
In China, the most-traded February contract on the Shanghai Futures Exchange hit a more than nine-year high before closing at 60,310 yuan a tonne, up 1.9%.
“Copper prices have gone way too far from fundamentals,” said China-based He Tianyu of CRU Group.
He also said copper demand from top consumer China in January-March 2021 could slow from the previous quarter because of the Chinese New Year holiday and cold weather that could dampen activity in the construction and infrastructure sectors.
Zinc inventories in ShFE warehouses jumped 22.5% to 35,008 tonnes, weekly data showed, bouncing from the lowest levels in a year in last week’s numbers.
Zinc was the biggest decliner on the LME, falling 1.4% to $2,849 a tonne in official activity.
LME aluminium eased by 0.2% to $2,032 a tonne, nickel retreated 0.9% to $17,950, lead dropped 0.8% to $2,019.50 and tin was little changed with a 0.02% decline at $21,105.—Reuters
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