LONDON: Copper fell on Monday as data showed weakness in China’s property sector, Chinese coal prices plunged, the US dollar strengthened to a 16-month high and a supply squeeze on the London Metal Exchange (LME) continued to ease.
China is the biggest consumer and producer of metals. Less homebuilding would reduce demand, and lower coal prices should reduce energy costs for smelters.
Metals are priced in dollars, so the strong greenback makes them more expensive for buyers with other currencies.
Benchmark copper on the London Metal Exchange (LME) was down 0.7% at $9,640 a tonne at 1746 GMT, having earlier reached $9,773, the highest level since Oct. 27.
Prices are still up around 25% this year after rising 26% in 2020.
Fears of a slowdown in China are overblown, with the government likely to act if needed to support growth, said Commerzbank analyst Daniel Briesemann.
He said copper should rally strongly later in the decade as demand increases and supply runs short. “The copper market will head into a structural deficit in the next few years but not in the next few months,” he said.
CHINA: While the property sector was weak, China’s industrial output and retail sales grew more quickly than expected in October.
SQUEEZE: A supply squeeze in the LME warehouses system continued to ease, with the premium for cash copper over the three-month contract falling to $32.50 from more than $1,100 last month.
On-warrant copper stocks in LME warehouses have risen to 50,300 tonnes from 14,150 tonnes last month but are still down from more than 200,000 tonnes in August.
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