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Markets

Shanghai copper eases on US tightening worries, softer Chinese demand

  • Higher interest rates could reduce money supply and potentially prompt investors to pull back from riskier assets such as metals.
08 Jun 2021

HANOI: Shanghai copper prices fell on Tuesday as fears of monetary policy tightening in the United States and softer demand in top consumer China pressured prices.

The most-traded July copper contract on the Shanghai Futures Exchange fell 0.3% to 71,450 yuan ($11,176.81) a tonne at 0449 GMT, while three-month copper on the London Metal Exchange edged up 0.1% to $9,910.50 a tonne.

US Treasury Secretary Janet Yellen said this week President Joe Biden's $4 trillion spending plan would be good even if it contributes to rising inflation and results in higher interest rates, Bloomberg News reported.

"Data in the United States is starting to point towards inflation taking hold and Janet Yellen has made comments...which sounds like a case of softening up everyone for what is potentially coming," said Malcolm Freeman, a director at broker Kingdom Futures in a note.

Higher interest rates could reduce money supply and potentially prompt investors to pull back from riskier assets such as metals.

Meanwhile, the Yangshan copper premium was last at $28 a tonne, hovering around its lowest since February 2016 and down 75% compared to May 2020, indicating weakening demand for imported metal into China.

China's copper imports fell 8% in May from the previous month, official data showed, as record-high prices further eroded buying interest in the country.

FUNDAMENTALS

  • LME nickel fell 0.3% to $17,835 a tonne, zinc advanced 0.2% to $3,005.50 a tonne and tin increased 1.3% to $30,935 a tonne.

  • ShFE aluminium dropped 0.7% to 18,340 yuan a tonne, nickel shed 1% to 130,320 yuan a tonne while lead rose 0.4% to 15,045 yuan a tonne.

  • LME cash aluminium was at a $5.24-a-tonne discount to the three-month contract, the smallest discount since May 7, indicating nearby supplies are tightening.

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