- Data on Friday showed Britain's economy shrank in November for the first time since the initial COVID-19 lockdown last spring.
- There's still considerable threats and challenges, all is not rosy with the virus and economic recovery.
LONDON: Copper prices dropped on Friday and zinc touched the lowest in nearly two months as investors trimmed some of their bullish positions on the back of rising coronavirus cases around the world, threatening economic growth.
Data on Friday showed Britain's economy shrank in November for the first time since the initial COVID-19 lockdown last spring, while the number of coronavirus infections in Germany rose above 2 million.
Three-month copper on the London Metal Exchange fell 0.7% to $7,989.50 a tonne in official trading, having risen earlier in the session to a one-week high on US President-elect Joe Biden's $1.9 trillion stimulus plan.
"There's still considerable threats and challenges, all is not rosy with the virus and economic recovery. And when Biden takes office, there could be tighter lockdown rules in Q1, so that could affect US economic activity," said Xiao Fu, head of commodity market strategy at Bank of China International in London.
"Copper has been very extended and very crowded, so it's not surprising to see traders trimming their positions. Since Q4 last year, there have been a lot of macro funds trading in the base metals space."
LME zinc fell to $2,709 a tonne, the lowest since Nov. 18, before paring losses to $2,720, down 1.3%.
Fitch Solutions analysts see base metals prices easing in the coming months, saying in a note: "The broader, deeper and strong 2021 economic recovery generally expected by investors is now probably already priced in."
Top copper producer Codelco is ratcheting up precautionary measures against the coronavirus at its mines amid a recent uptick in infections in the country.
The discount of LME cash nickel to the three month contract dropped to $30 a tonne, the weakest since late October, from $53.70 just three days ago. This indicates tighter availability of LME inventory supplies.
ShFE copper inventories fell to their lowest in more than nine years at 73,685 tonnes.
LME aluminium fell 0.4% to $1,998.50 a tonne in official activity, nickel dropped 1.6% to $17,997, lead shed 1.5% to $1,999 and tin rose 0.3% to $21,075.