LONDON: Copper prices retreated on Wednesday after touching their highest in nearly two weeks due to a resurgent dollar and persistent worries that central bank interest-rate hikes will hit metals demand.
Zinc and lead, however, surged on smelter shutdowns amid high power prices.
Three-month copper on the London Metal Exchange dropped 0.6% to $7,671.50 a tonne by 1600 GMT after earlier touching a high of $7,788, the strongest since Sept. 22.
“The backdrop is still grim. The Fed is still determined to go after inflation and China’s economy - consumer of half the world’s commodity supply - is still struggling,” said Tom Price, head of commodities strategy at Liberum.
Copper jumped 2.8% on Tuesday and other risky assets like stocks also rallied on hopes that central banks may slow down the pace of monetary tightening, but Price said that was misplaced optimism.
“For over a year, the Fed has not budged from its focus to curb inflation. Its hawkish message has never changed. And yet the market keeps hoping that there might be some kind of switch or relief.” Price forecasts another 10%-30% downside over the next 12 months in most base metals prices.
Weighing on the market was a stronger dollar index, making commodities priced in the US currency more expensive for buyers using other currencies.
Also undermining copper was news of a possible labour deal in a mandatory mediation process to avoid a strike at Antofagasta Minerals’ Los Pelambres copper mine.
LME zinc reversed earlier losses and gained 0.3% to $3,056.50 a tonne after Glencore said it will place its Nordenham zinc smelter in Germany on care and maintenance from Nov. 1.
LME lead also pushed higher, surging 5.1% to $2,035 a tonne, the highest in over a month, on worries of tight supply after Nyrstar said on Tuesday it would shut its Port Pirie lead smelter in Australia for 55 days.
The Nyrstar news came amid falling inventories, which have dropped in LME-registered warehouses by nearly a fifth over the past two months to the weakest levels since October 2007. LME aluminium rose 0.4% to $2,358 a tonne, nickel gained 2.2% to $22,530, but tin slipped 0.2% to $20,160.
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