Copper rebounds, but demand concerns dominate market
- Negative factors haven't gone away, but the question is whether they have been fully priced in or if there is more to go
- "The stronger dollar and the spreading Delta virus are additional negatives"
LONDON: Copper prices bounced on Friday but remained on track for the largest weekly drop since June due to worries about demand in top consumer China, the possible withdrawal of US central bank stimulus and rising COVID-19 infections.
Benchmark copper on the London Metal Exchange traded up 0.4% at $8,934 a tonne in official rings after touching $8,894 a tonne on Thursday, the lowest price since April 1. Prices of the metal used widely in the power and construction industries are down more than 6% so far this week.
"Negative factors haven't gone away, but the question is whether they have been fully priced in or if there is more to go," a copper trader said. "On positioning, it looks like most longs (bets on higher prices) have been cut or reversed into shorts."
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DEMAND: China accounts for around half of global consumption of industrial metals. Economic data show growth in the country has been slowing in recent months.
"Macro numbers out of China have been a drag for a while now," said ED&F Man Capital Markets analyst Edward Meir.
"The stronger dollar and the spreading Delta virus are additional negatives."
FED: Expectations the Federal Reserve will soon start tightening monetary policy have boosted the US currency, which when it rises makes dollar-denominated metals more expensive for holders of other currencies, weighing on demand.
COVID-19: Worries about economic activity and demand around the world are rising alongside a spike in global coronavirus cases caused by the Delta variant.
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TECHNICALS: Copper failed an attempt to decisively break below the 200-day moving average on Thursday.
Traders say the market is technically oversold and another attempt at the 200-day moving average - currently at $8,840 - may not happen before consolidation at current levels.
OTHER METALS: Aluminium gained 0.3% to $2,552, zinc was little changed at $2,950.5, lead was up a touch at $2,261, tin down a few dollars at $33,100 and nickel added 0.8% to $18,536 a tonne.
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