Copper extends fall under pressure from stronger dollar

05 Feb, 2024

LONDON: Copper prices extended their decline on Friday as the dollar rose after strong US payrolls data, adding downward pressure on top of patchy global industrial activity and concerns about demand in China.

Three-month copper on the London Metal Exchange (LME) fell 0.6% to $8,481 a metric ton by 1345 GMT after touching its lowest since Jan. 24 at $8,454.

The dollar index was up 0.5% after data showed that US employers added far more jobs than expected in January. A stronger dollar makes dollar-priced metals more expensive for buyers using other currencies. The price of copper, used in power and construction, was down 0.6% over the week, with a tightening supply outlook overshadowed by the US Federal Reserve pushing back on the idea of an interest rate cut as early as March.

“We remain positive on copper following the supply downgrades that were announced in the fourth quarter and have tightened 2024 balances,” said Standard Chartered analyst Sudakshina Unnikrishnan. “However, demand concerns remain, with ongoing worries over China’s real estate sector and the trajectory of Fed policy.”

Chinese shares registered their worst weekly drop in five years this week after cautious and piecemeal government stimulus measures to shore up the shaky economy.

The country is approaching the Feb. 9-16 Chinese New Year holiday, usually a period of tepid demand and muted trading. The slowing activity can be seen in copper inventories in warehouses monitored by the Shanghai Futures Exchange, with stocks up 36% this week to their highest since July. Zinc inventories rose by 23%.

Also indicating weak demand, LME cash copper’s discount to the three-month contract was at a record high of $109. There was some price support from copper stocks in LME-registered warehouses extending declines to the lowest level since September.

On the technical front, copper was supported by the 50-day and 21-day moving averages at $8,459 and $8,440 a ton respectively. LME aluminium shed 0.5% to $2,237 a ton, zinc fell 1.0% to $2,453, lead was down 0.9% at $2,133 while tin lost 0.4% to $25,700 and nickel advanced 0.6% to $16,320.

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