Copper slips, but prospect of tight supplies sustains sentiment

LONDON: Copper prices came under pressure on Monday due to worry about weak demand in top consumer China, but mine closures and disruptions raising the prospect of tighter supplies helped support confidence.

Benchmark copper on the London Metal Exchange (LME) was down 0.5% at $8,509 a metric ton by 1050 GMT. Prices of the metal used in the power and construction industries touched four-month highs at $8,640 a ton this month.

China’s troubled property market has weighed on industrial metals demand for most of this year, despite government measures to support the sector.

Julius Baer analyst Carsten Menke expects energy transition demand for copper to offset the slowdown in China.

“The past few weeks have shown copper supply is quite vulnerable, Cobre Panama in particular,” he said.

Copper has been climbing over the past two months due to uncertainty about supplies from First Quantum’s Cobre mine in Panama, accounting for 1% of global mined supply last year.

Copper retreats on stronger dollar, cautious Fed comments

Also helping sentiment was Anglo American cutting its copper production guidance by 20% and 18% for next year and 2025 respectively.

Expectations the Federal Reserve could cut U.S. interest rates in the first quarter of next year are weighing on the dollar which is hovering near 4-1/2-month lows against a basket of major currencies.

A falling U.S. currency makes dollar-priced metals cheaper for holders of other currencies, which could help demand.

However, the discount over the three-month copper contract near 31-year lows suggests the market does not expect imminent shortages on the LME.

Elsewhere, aluminium prices fell after data showed stocks in LME approved warehouses jumped 59,850 tons to 504,475 tons, the highest since early October.

However, the impact was brief as funds cutting short position pushed aluminium prices back towards the five-week highs of $2,269.50 a ton hit on Friday.

Three-month aluminium was up 0.6% at $2,261.

In other metals, zinc gained 0.6% to $2,547, lead advanced 0.3% to $2,088, tin slipped 0.5% to $25,050 and nickel dropped 1.8% to $16,840.