LONDON: Copper’s rally paused on Tuesday as rising COVID-19 cases and weak factory activity in China held prices below Monday’s five-month high.

The copper price surged more than 10% in the first two weeks of November as expectations for an easing of Chinese COVID controls and slower US interest rate rises fuelled hopes that economic growth and metals demand would improve.

But while US producer price data added to evidence that inflation may be subsiding, reducing the need for interest rate rises, China, the biggest metals consumer, is not out of the woods yet.

Daily COVID infections topped 5,000 for the first time, raising fears that localised lockdowns could widen. Data meanwhile showed slower than expected manufacturing growth in October and the first retail sales decline in five months.

JPMorgan cut its economic growth forecast for China this year to 2.9%. Benchmark copper on the London Metal Exchange (LME) was down 0.2% at $8,356.50 a tonne at 1701 GMT after reaching $8,600 on Monday.

Despite recovering some ground in recent months, prices of the metal used in power and construction are down more than 20% from a March peak of $10,845.

“The market is saying, hang on we need to slow down a bit,” said Saxo Bank analyst Ole Hansen, adding that some investors were selling to take profits on recent price gains.

He said prices were likely to consolidate before rising further in the new year as China brings COVID cases under control.

In a sign of improved supply, cash copper on the LME flipped to a $27.50 discount versus the three-month contract from a premium of more than $100 through much of September and October. Supporting metals prices were rising stock markets and a continuing decline in the US dollar, which makes dollar-priced metals cheaper for buyers with other currencies.

LME aluminium was down 0.7% at $2,435 a tonne, zinc eased by 0.9% to $3,102.50, nickel rose 4.3% to $30,065, lead was up 0.7% at $2,205.50 and tin jumped 6% to $23,355.

Comments

Comments are closed.