The price of copper slid as much as 3 percent to a four-week low on Monday as inventories showed their biggest one-day rise in 15 years, while lead and zinc tumbled more than 5 percent on bets that earlier gains had become overstretched. Copper inventories in warehouses registered with the London Metal Exchange (LME) rose 38,400 tonnes on Friday, exchange data showed, their biggest daily increase since July 2001. That took them to their highest in around two months.
Stocks have surged 62 percent from their early December low. Three-month copper on the LME closed down 2.5 percent at $5,495 a tonne, after falling to as low as $5,459. Prices hit a 17-month peak of $6,045.50 a tonne last month, but have since succumbed to selling. "Profit-taking is the main trend here," Societe Generale analyst Robin Bhar said. "At the end of the year, physical markets are quieter than would normally be the case, reflected in strong stock increases, particularly in copper."
"Given the increase we had in November, it is only logical to see some price correction. The metals are still fairly richly valued compared to their supply and demand fundamentals." The latest US Commodity Futures Trading Commission data showed that in the week to last Tuesday, hedge funds and money managers raised their net long position in copper futures and options to a record for the sixth straight week.
Much of November's rally was driven by a perception that Donald Trump's election as US president would lead to increased US infrastructure spending. It has since unravelled that rally as the market digested the implications for demand. LME zinc was the biggest faller among the base metals, sliding to a low of $2,576 a tonne before closing down 4.5 percent at $2,608 a tonne. Lead ended the day 3.4 percent lower at $2,169 a tonne, off a low of $2,130
They have been two of the best performing base metals this year, with zinc 65 percent higher and lead up by nearly a quarter. That has led to concerns that their gains had become overstretched, analysts said. "Zinc is still the metal that has gained most this year, and lead has been catching up over the last few weeks. The higher they go, the deeper they can fall," Commerzbank analyst Daniel Briesemann said. "Zinc and lead have gained the most, so there is more correction potential here than for the others." Aluminium closed down 0.3 percent at $1,712 a tonne, while nickel ended the day 2.6 percent lower at $10,880 a tonne and tin was down 0.1 percent at $21,200 a tonne.
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