LONDON: Copper prices came under pressure on Friday from profit-taking on long positions triggered by the higher dollar and concern about demand in top consumer China, but historically low stocks helped limit losses.
Benchmark copper on the London Metal Exchange traded little changed at $7,873.5 a tonne in official rings. Prices of the industrial metal are down nearly 5% since hitting a eight-year high of $8,238 earlier in January.
“Some of the funds were very long, the dollar is up and there is a long Chinese holiday coming up,” a trader said.
China’s attempts to curb COVID infections are likely to put a damper on next month’s Lunar New Year holiday, when hundreds of millions of people typically travel to their home towns.
Far fewer are expected to travel this year and many migrant workers have been asked to stay put.
“But China’s manufacturing will slow, even if not to the same extent as last year,” the trader said.
China’s factory activity likely expanded at a slower pace in January, a Reuters poll showed, although growth is expected to stay at an elevated level, suggesting momentum is firm going into 2021.
A higher US currency makes dollar-priced metals more expensive for holders of other currencies, which typically weighs on demand and prices.
Copper stocks in LME-registered warehouses at 74,575 tonnes are close to the 15-year trough seen last September. Cancelled warrants - metal earmarked for delivery - at 31% suggest more metal is due to leave.
Worries about copper supplies on the LME market have created a premium for the cash over the three-month contract for the first time since October.
Prices of the metal used to galvanise steel are down more than 6% so far in January, on course for their largest monthly drop since February last year, due to a 100,000 tonne surge in LME stocks over the past week.
PRICES: Aluminium was up 0.1% at $1,987.5 a tonne, zinc was down 0.2% at $2,586.5, lead lost 0.3% to $2,027, tin rose 0.6% to $23,140 and nickel ceded 0.2% to $17,761.