LONDON: Copper prices dropped on Monday as worries about the outlook for demand in top consumer China dominated sentiment ahead of data from the country’s manufacturing sector, while a softer dollar provided some support.
Benchmark copper on the London Metal Exchange was down 0.7% at $9,197 a tonne at 1702 GMT. It hit a seven-month high earlier this month as speculators piled in after China removed its COVID-19 restrictions.
“Production of metal/copper containing goods in China, things like cars and washing machines, rose significantly last year. They don’t need to be produced this year even if shoppers return,” said Julius Baer analyst Carsten Menke.
Neither does Menke expect any boost to metals demand from the property sector. “China’s population is shrinking, demand for property is declining structurally, why would the government use property to stimulate growth?” Clues to demand prospects will come from surveys of purchasing managers in China’s manufacturing sector this week.
A lower US currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand.
The future direction of interest and currency rates could be determined by earnings reports from Apple, Alphabet and Amazon and a meeting of the Federal Reserve this week.
“We have long argued that the Fed will need to take a rate pause at some point, but we think it will not do so at this particular meeting,” Edward Meir, analyst at ED&F Man Capital Markets, said.
Technical support for copper is around $9,025 where a Fibonacci retracement level and the 21-day moving average meet.
Meanwhile, the zinc market is focused on dwindling stocks in LME approved warehouses, which at 17,425 tonnes are at their lowest since 1989 and large holdings of zinc warrants and cash contracts.
Concern about availability on the LME has created a premium or backwardation for the cash over the three-month zinc contracts, which was last trading at $26 a tonne.
Three-month zinc was up 0.7% at $3,438 a tonne.
In other metals, aluminium was down 1.5% at $2,588 a tonne, lead fell 1.7% to $2,145, tin ceded 3.6% to $29,740 and nickel was up 1.5% at $29,350.
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