Copper falls as LME inventories rise to 11-month high

LONDON: Copper prices fell on Tuesday as a stronger dollar and rising inventories in London Metal Exchange-registered warehouses pressured the market, which was operating with thin trading volumes due to the Chinese Lunar New Year holiday.

Benchmark three-month copper on the London Metal Exchange was down 1.4percent at USD12,673 a metric ton in official open-outcry trading after hitting USD12,640, its lowest since February 6. The metal, used in power and construction, is now down 13percent from a record high of USD14,527.5 hit on January 29 on a wave of speculative buying, encouraged by expectations of strong demand.

The record-high prices muted demand in top metals consumer China and added to the 2025 stockpiling in the United States, driving combined copper stocks of the three exchanges - the LME, the Shanghai Futures Exchange, and US Comex exchange - to more than one million tons for the first time in more than two decades.

Copper inventories in the LME system reached an 11-month high of 221,625 tons after 9,975 tons were delivered to LME-registered warehouses in the US, South Korea and Taiwan, daily LME data showed. What matters next is how China reacts once it returns from holiday on February 24 and whether these inventories start to decline, said Alastair Munro, metals strategist at Marex.

The discount on the LME cash copper contract to the three-month contract widened to USD114 a ton on Monday, its highest level in a year, indicating ample nearby supply. This marks a sharp reversal from a premium of USD102 on January 20. On the technical front, the 50-day moving average supports copper at USD12,619.

In other metals, lead lost 0.6percent to USD1,946 a ton in official activity with the LME stocks jumping to 287,125 tons, highest since June, as 54,675 tons were delivered to warehouses in Singapore ahead of settlement or rollover of maturing contracts on the LME on Wednesday.

Aluminium edged 0.2percent lower to USD3,046, zinc eased 0.3percent to USD3,281, tin was down 0.1percent at USD45,650, while nickel slid 1.4percent to USD16,870.