LONDON: Copper prices edged lower on Friday as investors sought to balance a potential boost to metals demand from the reopening of China against weak short-term signals of consumption as the country celebrates the Lunar New Year.
Three-month copper on the London Metal Exchange (LME) slipped 0.7% to $9,245 a tonne in official open-outcry trading, taking its gains to about 1% for this week and 11% for the month so far.
“We think the recent increase in base metals will hold, more or less, but this quarter will be challenging,” said Edward Gardner, commodities economist at Capital Economics in London.
“It’s not until March that we get the new budget for China, where they expect to see some new stimulus measures.”
Capital Economics expects the LME copper price to weaken this quarter, ending March at $8,500 a tonne before rebounding to end the year close to the current level, he added.
People across China on Friday crowded into trains and buses for one of its busiest days of travel in years, feeding fears of new surges in a COVID-19 outbreak that officials say has hit its peak.
Copper declines on recession and Chinese demand fears
Shanghai Futures Exchange copper closed 0.1% up at 70,420 yuan ($10,399.47) a tonne, with a weekly gain of 2.3%.
The exchange will remain closed for trading on Friday evening and next week because of the Lunar New Year holidays.
“For now, onshore physicals are soft, copper demand is still 10% lower year on year and import arbitrage is negative,” said Zerlina Zeng, a senior research analyst at Fitch Solutions.
“But onshore traders are turning more positive on China’s macro outlook.”
SHFE copper inventories jumped 36.6% to 139,967 tonnes on Friday.
CITIC Futures noted strong production among smelters this month and that weak consumption could result a higher than normal inventories build-up during the holiday, reaching as high as 300,000 tonnes.
Among other metals, LME aluminium rose 1% in official activity to $2,613 a tonne and tin advanced 1.8% to $29,315 while zinc eased 0.9% to $3,425, nickel dropped 1.9% to $28,800 and lead was little changed at $2,143.