Copper retreats on fears over Chinese price crackdown

LONDON: Copper prices eroded further on Friday as some investors took profits and others worried about threats by top consumer China to curb surging commodity prices.

Copper on the London Metal Exchange (LME) was set for its biggest weekly drop since September 2020 after a sizzling rally with near 40% gains since the start of the year to a record peak of $10,747.50 last week.

By 1445 GMT on Friday, three-month LME copper had slid 1.6% to a two-week low of $9,884 a tonne, down 3.5% on the week.

"It's the potential risk of Chinese authorities clamping down on prices that seems to be the catalyst for the turnaround this week," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

China, the world's biggest copper user, on Wednesday said it would strengthen its management of commodity supply and demand to curb "unreasonable" increases in prices and prevent them from being passed on to consumers.

"The turnaround you could argue was overdue. The market had almost gone vertical during the past month and so we seem to be entering a consolidation phase right now," Hansen added.

He said a further leg of the correction could take LME copper down to about $9,600 a tonne.

"We are of the opinion that this is an old fashioned clear out in a market which is still in a bullish environment," Alastair Munro at broker Marex said in a note.

LME aluminium gained 0.5% to $2,408 a tonne as a consultancy forecast that almost 1 million tonnes of smelting capacity in drought-hit Yunnan province in southwest China could be shut temporarily owing to restrictions on electricity supply.

Power shortages in Yunnan also lifted LME zinc, which advanced 0.7% to $2,975 a tonne, as smelters faced production cuts and treatment charges jumped.

LME lead dropped 0.9% to $2,197, nickel shed 1.5% to $16,900 and tin fell 0.7% to $29,540.