Copper hits five-week low as dollar rallies after US payrolls data

LONDON: Copper prices in London hit the lowest in five weeks on Friday, under pressure from a stronger dollar, stronger-than-expected US employment data and mixed trade numbers from top metals consumer China.

Three-month copper on the London Metal Exchange was 3.7% lower at $9,773.50 per metric ton by 1556 GMT, after breaking below the 50-day moving average at $9,860 to touch its lowest since May 2 at $9,755. The dollar surged after data showed the US economy created a lot more jobs than expected last month, suggesting that the Federal Reserve could take time in starting its easing cycle this year.

This made dollar-priced commodities more expensive for buyers using other currencies and in general worsened prospects for growth-dependent metals.

Copper, used in power and construction, has fallen 2.7% this week, leaving it 12% below the record high of $11,104.5 touched on May 20. “We had a big rally recently but there were lots of signs that the physical market was not particularly strong, so this pull-back makes sense,” said Dan Smith, head of research at Amalgamated Metal Trading. In China, indicators remained mixed. May trade data showed better-than-expected exports, suggesting factory owners were managing to find buyers overseas. However, imports increased at a slower pace, highlighting the fragility of domestic consumption.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange are at more than four-year highs after surging since the start of 2024. They rose 4.7% this week.

“Historically, copper stocks at SHFE exchanges start to decline from the second half of March with the second quarter seasonally the strongest for copper demand,” said ING commodities analyst Ewa Manthey.

Unwrought copper imports last month came in higher than expected, adding to concerns that inventories in China would rise further. “Copper prices are due a downward correction, unless the Chinese government unveils sustained stimulus measures, or we see Chinese smelters cutting output,” Manthey added.

LME aluminium fell 2.5% to $2,580 a ton, zinc dropped 4.6% to $2,776.50, lead lost 1.8% to $2,200, tin was down 2.6% to $31,350. Nickel was off 3.0% at $17,990. Top producer Indonesia has issued an annual nickel ore output quota of 240 million tons for the next 3 years, an official said.