LONDON: Copper prices slid on Monday on Chinese demand concerns and high inventories, while market participants awaited a Federal Reserve policy meeting and U.S. data releases this week for further direction.
Three-month copper on the London Metal Exchange fell 0.7% to $9,045 per metric ton by 1106 GMT. It was down by more than 18% from all-time high in late May.
“Copper seems to be holding at the key level of $9,000 but there has been a lot of negative momentum,” said Ole Hansen, head of commodities strategy at Saxo Bank, adding that the expectation of long-term demand is yet to materialise.
LME copper inventories at 239,100 tons have more than doubled since the start of June while stocks monitored by Shanghai Futures Exchange have surged about tenfold so far this year, despite recently retreating to a two-month low of 301,203 tons.
“Copper buyers will come back, the drivers for the energy transition are still there,” Hansen said.
Copper set for third weekly decline on Chinese demand woes
Copper, widely used in making cables for its conductivity, is seen as a key to energy transition.
The State Grid Corporation of China, a major copper buyer, earmarked a record 600 billion yuan expenditure this year, state-media Xinhua reported on Friday.
Copper prices pared losses after news that the union at the world’s largest copper mine, Escondida mine in Chile, has called on members to reject a final contract offer from the company and prepare for a strike.
In terms of macro-drivers, Hansen said the metals market risk appetite will hinge on the tone about interest rate cuts from three central banks’ meetings this week.
The Federal Reserve is expected to keep rates unchanged on Wednesday, but softer U.S. jobs data in June, cooling inflation and comments from top Fed officials have prompted the rate futures market to more than fully price in a 25 basis-point cut in September.
Market participants expect lower borrowing costs could support manufacturing activities and therefore metals demand.
For other metals, LME lead rose 0.6% to $2,080 a ton, zinc was down 0.1% at $2,666.5, tin was up 0.4% at $29,695, nickel moved 0.4% higher to $15,860, and aluminium was down 1% at $2,265.
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