Copper falls as traders gauge hopes of China demand improvement

Copper prices fell on Monday, as weak physical consumption prompted reassessment of how quickly and strongly demand would rebound in top consumer China following its COVID-19 restrictions removal last month.

The most-traded March copper contract on the Shanghai Futures Exchange fell 1.2% to 69,320 yuan ($10,262.79) a tonne by 0619 GMT as trading resumed after a week-long Lunar New Year holiday, while three-month copper on the London Metal Exchange dipped 0.7% to $9,197 a tonne.

Copper prices since mid-July 2022 have risen 28% in London and 33% in Shanghai, underpinned by hopes of demand recovery in China post dismantling of the “zero-COVID” policy.

However, physical copper demand remained tepid, as shown by falling premiums. On Friday, LME copper posted its first weekly fall since mid-December.

China’s factory activity in January is expected to have contracted more slowly than in December, a Reuters poll showed, with production hampered as workers continued to fall sick after the government relaxed rules.

“Copper prices have risen to a relatively high level, and the reality may be difficult to make a positive response in the short term,” Jinrui Futures said in a note.

“It is expected that copper prices may face a certain risk of a correction after the (New Year) festival.” However, a weaker dollar and supply threats in Peru where MMG Ltd’s Las Bambas mine would likely have to halt production from Feb. 1 due to a shortage of “critical supplies”, provided some support to copper prices.

Copper stumbles on stronger dollar, Chinese demand

LME aluminium fell 0.9% to $2,602.50 a tonne and tin dropped 3.5% to $29,750 a tonne, and lead declined 0.4% to $2,175 a tonne. SHFE nickel rose 2.7% to 220,100 yuan a tonne and tin jumped 2% to 236,650 yuan a tonne, while aluminium fell 0.7% to 18,975 yuan a tonne and zinc shed 1.9% to 24,130 yuan a tonne.

LME cash zinc was at a $25.25 per-tonne premium over the three-month contract, the highest in more than three weeks, as inventories fell to 17,675 tonnes, the lowest since at least 1998, based on Refinitiv Eikon data.