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Copper falters on strong dollar and low Chinese demand

  • Benchmark copper on the London Metal Exchange (LME) was down 1% at $10,113.50 a tonne in official trading.
  • "Demand concerns have been raised onshore (in China), particularly in copper," broker Marex said in a note.
Published June 2, 2021
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LONDON: Copper edged lower on Wednesday as investors took some money off the table over worries about a dip in demand from top consumer China while a firmer dollar also sapped the metal's appeal.

Benchmark copper on the London Metal Exchange (LME) was down 1% at $10,113.50 a tonne in official trading.

"Investors are getting more cautious, and that is presumably prompting some profit-taking," said ING analyst Wenyu Yao.

With the US dollar index snapping back above 90 on Wednesday, the dynamics from the macro market are less supportive for copper, she added.

The Yangshan copper premium fell to $28.50 a tonne, its lowest since February 2016, indicating weakening demand for imported metal into China as high copper prices deter downstream consumption.

"Demand concerns have been raised onshore (in China), particularly in copper," broker Marex said in a note.

Supply threats from a looming election in Peru and strikes at BHP's Escondida and Spence mines and Vale's Sudbury mine have supported prices. L2N2NJ25M]

Overall, projected higher demand for copper because of the global move towards a lower-carbon economy alongside an expected weak supply response is seen as the trigger for future prices to remain elevated, according to analysts.

DOLLAR: The dollar firmed after hitting a five-month low as a pick-up in US manufacturing kept bets alive for a quicker normalisation of Federal Reserve policy.

A stronger US currency makes dollar-priced copper less attractive to global buyers.

SPREAD: LME cash copper's discount to the three-month contract was at $10 a tonne, compared with a premium of $30.15 on April 23, pointing to easing supply concerns.

POSITIONING: Funds whittled down their long positions in LME copper to 26% of open interest as of Friday, from 68% in February, Marex said.

Money managers cut their net long position for a third straight week to 33,991 contracts in the week to May 25.

OTHER METALS: LME aluminium was down 0.2% at $2,463 a tonne, zinc rose 0.6% to $3,082.50, lead shed 0.6% to $2,207, tin edged up 0.5% to $30,860 and nickel was up 0.2% at $18,173.

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