LONDON: Copper prices drifted lower on Thursday as the dollar strengthened and investors reckoned that China’s recent easing of some COVID-19 curbs might not be enough to boost demand.
Three-month copper on the London Metal Exchange slipped 1.3% to $8,185.50 a tonne in official open-outcry trading after dropping 1% on Wednesday.
Copper touched near five-month highs on Monday on news that the world’s top metals consumer China had relaxed some COVID-19 restrictions and had moved to shore up the country’s troubled property sector.
Chinese stocks on Thursday, however, closed weaker after a flare-up in domestic COVID-19 cases renewed concerns over more lockdowns.
“We think the market got ahead of itself on the reopening front,” said Geordie Wilkes, head of research at broker Sucden Financial, adding that vaccination rates were relatively low in China.
“That doesn’t really lend itself to an economy that’s fully open … in the near term we’re expecting prices to correct to the downside.”
Also weighing on the market was a stronger dollar index after solid U.S. retail sales data cast doubt on market bets that inflation is cooling and the Federal Reserve might pause its aggressive path of interest rate hikes.
Copper rally stalls as Covid spreads in China
Hawkish remarks from Fed official James Bullard on Thursday added to doubts about a shift in policy.
A firmer dollar makes greenback-priced metals more expensive to holders of other currencies.
Wilkes said weaker copper spreads indicated healthier supply while rising copper output in China was also pressuring the market.
The benchmark LME copper spread, the difference between the cash and three month contracts, has expanded its discount to $35 a tonne, the biggest in eight months.
LME nickel extended losses, sliding 5% to $26,150 a tonne in official activity, after tumbling 9% on Wednesday in volatile and thin trading that prompted the exchange to step up monitoring.
LME aluminium shed 1.7% to $2,370 a tonne, zinc fell 1.7% to $3,002, lead eased 0.6% to $2,158 and tin dropped 2.5% to $23,050.