LONDON: Copper bounced on Monday despite worries that spreading COVID-19 infections in top metals consumer China could hit demand while nickel slumped in thin trade amid uncertainty about short positions in the market.
Three-month copper on the London Metal Exchange (LME) gained 0.6% to $10,331 a tonne by 1730 GMT after two sessions of losses.
The market is nervous because COVID continues to spread in Shanghai, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“But the return to these levels from $10,500 last week may be attracting some bottom fishing,” he added.
China’s financial hub of Shanghai launched a planned two-stage lockdown to contain a coronavirus surge, adding to worries about growth prospects for the world’s second-biggest economy.
Hansen said investors were also wary after a key measure of the US bond yield curve inverted for the first time since 2006 in a sign that recession risks are increasingly being priced in.
“The yield curves in the US are screaming that we are heading towards an economic slowdown, which could lead to lower demand on a global perspective,” he said.
Benchmark LME nickel slid as much as 8.3%, but avoided its 15% daily price limit and pared losses to $32,765 a tonne, down 7.7%.
Traders were unsure about the status of major short position by one of the world’s top producers, China’s Tsingshan Holding Group. Short-covering by the company was blamed for market chaos and a shutdown in trading on March 8.
Nickel on the Shanghai Futures Exchange tumbled by as much as the 17% limit to 208,110 yuan a tonne, having posted a record weekly gain on Friday.
LME volumes were lower than usual, with copper at 8,855 lots by 1730 GMT, compared with a full-session average of 16,648 lots so far in March. “In the copper market there’s still a lot of fence-sitting; we’ve had a number of failed upside attempts so far this year,” Hansen said.
Also weighing on the metals market was a firmer dollar against the backdrop of expectations of increases to US interest rates, making dollar-priced metals more expensive for holders of other currencies.
In other metals, LME aluminium rose 0.1% to $3,609 a tonne, lead gained 0.7% to $2,368, zinc advanced 0.4% to $4,082 and tin was up 0.7% at $42,590.