Copper heads for biggest weekly fall since March 2020

LONDON: Copper on Friday was on track for its biggest weekly fall since March 2020 after the Federal Reserve signalled it would begin to tighten monetary policy and China said it would sell state reserves to limit prices.

The shift in tone from the U.S. central bank also pushed the U.S. dollar towards its largest weekly gain since April 2020, making metals more expensive for buyers with other currencies. Stock markets fell.

Benchmark copper on the London Metal Exchange (LME) was down 1.7pc at $9,159 a tonne at 1650 GMT and down around 8.5pc this week.

The sell-off follows a remarkable rally, with the metal used in power and construction reaching a record high of $10,747.50 in May.

"We probably have seen the peak for this year," said ING analyst Wenyu Yao, adding that rising demand from infrastructure building and electrification would likely keep prices around current levels in the coming years.

FED: Fed officials, increasingly confident the U.S. economy is recovering fast from the pandemic-induced recession, have begun telegraphing an exit from the central bank's extraordinarily easy monetary policy.

CHINA: Analysts at Macquarie said they expected China's state metal sales to be relatively small - around 300,000-500,000 tonnes for aluminium - and to decrease as prices come down.

OUTLOOK: Macquarie also said it expected a deficit of copper this year, small surpluses over 2022-2024 and structural undersupply from 2025. They said prices would average around $8,000-$9,000 over the next four years.

TECHNICALS: Copper fell below its 100-day moving average at $9,242, worsening its technical picture.

STOCKS: Copper inventories in LME-registered warehouses rose by 24,925 tonnes to 168,675 tonnes, the highest level since April.

Stockpiles in warehouses registered with the Shanghai Futures Exchange fell by 8,440 tonnes to 172,527 tonnes in the week to Friday.

CHINA TRADE: China's aluminium imports declined in May and its copper exports rose, customs data showed.

OTHER METALS: LME aluminium was down 0.5pc at $2,387 a tonne, zinc fell 2.6pc to $2,836.50, nickel was flat at $17,170 and tin was down 2pc at $30,000.

Lead bucked the trend, rising 1.4pc to $2,160.