LME copper slips on uncertainty

15 Mar, 2024

LONDON: Copper prices in London eased on Thursday, retreating from an 11-month peak as doubts emerged over plans by Chinese smelters to cut output while demand in the top metals consumer remained lacklustre. Three-month copper on the London Metal Exchange slipped 0.4% to $8,888 a metric ton in official open-outcry trading, having spiked to $8,976.50 for its strongest since April 19 last year.

Prices surged on Wednesday after China’s biggest copper smelters agreed to cut output at some loss-making plants while adjusting maintenance plans and postponing new projects.

“The news around the Chinese smelter cuts is grey, there’s no clarity on it. I don’t think they’re going to cut, they’re going to keep churning out metal,” said Alastair Munro, senior base metals strategist at broker Marex.

Chinese smelters had been hit by a sharp fall in the fees to process copper concentrate, but analysts had forecast that they could rebound in the second quarter, the seasonal peak of Chinese smelting maintenance.

“In Shanghai they’ve seen big stock builds and there’s no sign of any real physical demand in the here and now,” Munro added. Inventories in warehouses monitored by the Shanghai Futures Exchange (SHFE) have nearly tripled over the past month to 239,245 tons, weekly data shows. The rally has been fuelled by speculators and funds, some of which were still buying this morning, Munro said. “It’s a money-led rally, which can continue,” he said.

SHFE prices rallied to their highest in nearly three years, with the most-traded May copper contract jumping as much as 3.5% to its highest since May 2021 before paring gains and closing daytime trade with a 2.2% gain. Munro said some arbitrage traders were selling LME and buying Shanghai copper.

China produced 13 million tons of refined copper last year, or 47% of global output, data from the World Bureau of Metal Statistics showed. It is also the world’s biggest copper consumer.

Among other metals, LME aluminium fell 0.4% in official activity to $2,254.50 a ton, nickel dropped by 1.8% to $18,025, zinc lost 0.7% to $2,558 and lead was down 1.1% at $2,145.50.

Tin rose 0.4% to $28,175, having touched $28,450 for its highest since last August.

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