Copper dragged off record high by subdued physical demand

LONDON: Copper prices fell on Tuesday, drifting away from the previous session’s record high as investors assessed the sustainability of the price rally while physical demand remains subdued.

Three-month copper on the London Metal Exchange (LME) lost 0.1% to $10,878.50 a metric ton by 1019 GMT, but the contract remains 27% up this year.

Copper, used in power and construction, hit a record $11,104.50 on Monday as a rally triggered by short covering created momentum for speculators and funds to bet on a potential long-term shortage of copper in the transition to green energy.

COMEX copper prices hit a record high of $5.1985 per lb, or $11,460 a ton, on Monday and were up 0.4% at $5.1075 on Tuesday.

“Given the scale of the speculative-driven move in copper, prices are becoming increasingly detached from the near-term fundamentals,” said Warren Patterson, head of commodities strategy at ING.

“While it is difficult to call a top in the current market, we do not believe the recent move higher is sustainable.”

Copper hits record high on China’s property support measure

Demand in top metals consumer China remains soft, with copper inventories in warehouses monitored by the Shanghai Futures Exchange at seasonal record highs and Chinese refined copper output rising despite low treatment charges (TCs), he added.

From a technical point of view, copper has high relative strength index (RSI) readings, which calls for consolidation, said Ole Hansen, head of commodity strategy at Saxo Bank.

“Overall, investors are likely to remain resilient given the supportive supply/demand outlook, so any correction at this point is likely to be relatively shallow,” he added.

Meanwhile, LME aluminium added 1.7% to $2,674 a ton, buoyed by a drop in on-warrant stocks in LME-registered warehouses to a two-week low of 556,100 tons after 82,000 tons of cancellations.

Rio Tinto declared force majeure on third-party contracts for alumina exports from its refineries in Queensland, Australia.

In other metals, zinc was up 0.7% at $3,136 a ton after hitting $3,150 for its highest since February 2023. Lead added 0.1% to $2,343, tin fell 1.1% to $34,065 and nickel was down 0.8% at $21,440.