LONDON: Copper prices held steady on Wednesday as rising expectations that China will ease COVID-19 controls next year were offset by a bleak short-term outlook for manufacturing and metals demand.
The market also braced for a big US interest rate rise later in the day that will stifle economic activity, though many investors hope the Federal Reserve will signal a slower pace for future hikes.
Benchmark copper on the London Metal Exchange (LME) was almost unchanged at $7,654 a tonne in official open-outcry trading after rising 2.7% on Tuesday.
Triggering Tuesday’s gains was an unverified note circulating on social media that said a “Reopening Committee” had been formed by Chinese Politburo Standing Member Wang Huning which aimed to relax COVID rules in March 2023.
Chinese policymakers also pledged on Wednesday that growth was still a priority and they would press on with reforms.
Chinese stock markets rose for a second day and the yuan held its gains against the dollar, making dollar-priced metals cheaper for local buyers.
However, COVID restrictions currently in force are disrupting Chinese industry and data this week showed a slump in factory activity around the world. Copper prices have fallen 30% from a peak in March.
“We are increasingly bearish on the broader base metals complex and recommend selling rallies,” said analysts at Citi. US and European economic data is likely to worsen and Chinese growth may well disappoint, they said. “We see metals offtake collapsing in the next 6 months, weighing on prices.” That said, metals should be supported by low levels of inventories and tight supply, said Saxo Bank analyst Ole Hansen.
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