LONDON: Copper prices dropped to four-week lows on Monday as doubts about a recovery in demand, tensions between the United States and China and a stronger dollar spurred a sell-off.
Benchmark copper on the London Metal Exchange (LME) was down 1% at $8,893 a tonne at 1056 GMT from an earlier $8,880, the lowest since Jan. 10. Copper is down nearly 7% since Jan. 18 when prices hit seven-month highs of $9,550.5 a tonne.
One spotlight is on top consumer China, where economic growth last year slumped to one of its weakest levels in nearly half a century due to COVID restrictions and a property market slump.
Copper prices fall on stronger dollar
“There are doubts about demand recovery in China after the growth data. Manufacturing activity is still shrinking,” a metals trader said. “The dollar is also having a big influence on the base (metals) complex.”
Expectations that the U.S. Federal Reserve will likely lift benchmark interest rates above 5% after data showing the labour market remains strong has boosted the dollar.
When the U.S. currency rises, it makes dollar-denominated metals more expensive for holders of other currencies.
Tensions between the United States and China rose after the U.S. military shot down on Saturday what it believed was a Chinese surveillance balloon, a response China described as an “obvious overreaction”.
“We are not sure what the fallout will be with the China/U.S. confrontation over the balloon, but we suspect both sides are not going to escalate things and try to get their relationship back on track,” said Marex analyst Edward Meir.
Elsewhere, metals markets are focused on historically low inventories in LME approved warehouses, although discounts for the cash over the three-month contracts suggest traders are not concerned about availability on the LME market.
The exception being zinc, where there is a premium for the cash contract. However, three-month zinc was down 2.1% at $3,172 a tonne.
In other metals, aluminium fell 2% to $2,517, lead was up 0.3% at $2,106, tin ceded 5.7% to $26,750 and nickel fell 2.4% to $27,920.