Copper stumbles on worries about China demand, power crisis

LONDON: Copper prices retreated on Tuesday, weighed down by worries that a power crisis and slower economic growth in top metals consumer China will erode demand.

Three-month copper on the London Metal Exchange eased 0.6% to $9,804.50 a tonne in official open-outcry trading after rising by 1.7% on Monday.

High power prices and efforts to curb emissions in China have dampened output of some metals, but analysts are concerned that fabricators will also be hit, undermining consumption.

"There are a lot of uncertainties around, including how severe the demand destruction will be from the power crunch both in China and elsewhere in the world," said Wenyu Yao, a senior commodities strategist at ING Bank.

"So, in the short term the market will remain very volatile until things become clearer."

Low inventories have supported copper prices, which hit a five-month peak of $10,452.50 a week ago, but Chinese research house Antaike said more material may soon become available.

"The congestion of global shipping routes has been alleviated to some extent. In-transit stocks, commercial stocks and other hidden stocks may become dominant," it said in a note.

Copper rebounds on supply worries, weaker dollar

On-warrant copper stockpiles in LME warehouses rose for the fifth straight session to 27,100 tonnes, rebounding slightly from a 1998-low of 14,150 tonnes hit on Oct. 14. They are still down, however, 84% over the past two months.

The premium of LME cash nickel over the three-month contract shot up to $189 a tonne, a level unseen since October 2019, indicating tightness in nearby supplies, following Eramet's report of a drop in ferronickel output in New Caledonia.

Three-month nickel was the only LME metal in positive territory, rising 0.2% to $20,350 a tonne.

The global zinc market deficit declined to 14,900 tonnes in August from a revised deficit of 40,400 tonnes in July, while the lead market flipped to a deficit of 24,800 tonnes in August from a revised surplus of 27,900 tonnes, data showed.

LME aluminium fell 1.1% in official activity to $2,844 a tonne, zinc declined 1.4% to $3,411, lead dropped 0.7% to $2,421 and tin shed 0.3% to $37,350.