Copper falls as oil-driven inflation fears take on strong China data

LONDON: Copper fell on Monday, as heightened inflation fears amid rising oil prices overpowered positive cues from estimates-beating economic and investment data from China.

The most-active copper contract on the Shanghai Futures Exchange closed daytime trading down 0.87percent at 99,720 yuan (USD14,452.59) a metric ton, after falling as much as 1.85percent earlier.

The benchmark three-month copper contract on the London Metal Exchange, meanwhile, dipped 0.16percent to USD12,760 a ton as of 0730 GMT. China’s industrial output rose 6.3percent year-on-year in January-February, retail sales jumped 2.8percent, and fixed asset investment rose 1.8percent, according to data from the National Bureau of Statistics on Monday.

All readings beat estimates. Copper’s loss came as Brent futures remained above USD100 a barrel, with the US-Israeli war on Iran entering its third week. It added to inflation fears as US consumer spending rose in January.

The red metal is expected to face downward pressure driven by a stronger US dollar, a delay in the Federal Reserve rate cut and weak demand resumption in China after the Lunar New Year break, analysts at Citi said in a note.

They said the long-term outlook for copper remained bullish, while near-term prices could find support from post-Lunar New Year restocking, especially from the power grid sector.

Aluminium was also under pressure from oil-driven inflation concerns, but prices on the Shanghai and London exchanges diverged. SHFE aluminium contract dropped 0.45 percent to 25,170 yuan a ton, and the London benchmark three-month aluminium rose 0.48percent to USD3,456. Fears of a supply shortage continued to support prices amid the war. Aluminium Bahrain said on Sunday that it was shutting 19percent of its capacity after declaring force majeure on March 4.

India’s Hindalco Industries halted production of an aluminium product, citing force majeure at certain Mideast gas suppliers. Australia’s South32 said on Monday that it had placed its Mozal aluminium smelter in Mozambique on care and maintenance after failure.

Elsewhere on SHFE, zinc dropped 1.30percent, lead declined 1.63percent, nickel shed 1.54percent, and tin lost 3.18percent. Among other LME metals, zinc dropped 0.68percent, lead pulled back 0.60percent, and nickel dipped 0.21percent. Tin gained 0.47percent.