LONDON: Copper prices retreated on Thursday from the previous day’s record highs on cautious remarks by the Federal Reserve on US interest rate cuts and concern about Chinese physical demand.
Three-month copper on the London Metal Exchange eased 1.8percent to USD10,978 per metric ton in official open-outcry trading, after hitting a record high of USD11,200 on Wednesday on supply concerns. “Copper is pulling back today because Fed sentiment for a December rate cut is not as strong and Chinese brokers are bearish on Shanghai prices with physical demand lacklustre,” said Robert Montefusco at broker Sucden Financial.
Fed Chair Jerome Powell surprised markets on Wednesday by casting doubt on the prospects of an interest rate cut at the central bank’s next meeting in December, saying such a move was “not a foregone conclusion.” That helped propel the dollar index to three-week high, making commodities priced in the US currency more expensive for buyers using other currencies.
The most-traded copper contract on the Shanghai Futures Exchange edged 0.1percent lower to 87,960 yuan (USD12,348.73) a ton. Physical demand in top metals consumer China has shown signs of weakness as prices surge, with the premium paid over SHFE prices to buy copper in the spot market flipping to a discount of 55 yuan per ton on Thursday from a premium of 90 yuan on October 15.
Major miners reported lower copper output in the first nine months of the year, with a series of disruptions leading analysts to hike their price forecasts for next year according to a Reuters poll.
Dan Smith, managing director at Commodity Market Analytics, said the underlying market was bullish, but it might be held back by some miners seeking to sell forward to lock in the high prices. “I’d imagine there’s a fair bit of hedging from copper producers, which is preventing prices from really taking off.
These are pretty good numbers for a lot of copper producers.” Among other metals, LME aluminium dropped 1.4percent in official activity to USD2,845.50 a ton, nickel eased 1percent to USD15,215, zinc slid 1.9 percent to USD3,025, lead dipped 0.1percent to USD2,024 and tin shed 0.6percent to USD35,960.
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