LONDON: Copper prices slid to near one-month lows on Wednesday, pausing their strongest rally in years as strong demand expectations for the metal crucial for electrification are yet to translate into higher consumption.
Three-month copper on the London Metal Exchange hit its lowest since May 9 at $9,860 a metric ton, below the key $10,000 technical level. By 1559 GMT it had steadied to $9,951.
A stronger dollar, after data showed the US services sector rebounded in May, highlighting uncertainty surrounding the expected start of the Federal Reserve’s easing cycle later this year, also weighed on metals.
Copper prices have hit record highs across exchanges in London, Shanghai and Chicago over the past two months. LME copper has since retreated but remains up 15% this year.
“Fundamentals were not there before the copper rally, and after the price rally, it got even worse,” Liberum’s Tom Price said.
Top copper consumer China’s inventory was last at 321,695 tons, the highest since April 2020, while LME inventories have hit 118,950 tons for their highest since April 24.
Sellers have had to pay their Chinese clients to destock copper since mid-May instead of being paid a premium on top of the exchange price. Yet speculative interest chose to stay in the metals commodity class, Price added. “I have got more calls on aluminium from fund clients, looking for stories in metals to invest,” he said.
Since late May, more funds had been selling copper and buying aluminium, which has gained 11% this year. LME aluminium was last down 1.4% at $2,627.
BNP’s David Wilson noted supply concerns for alumina, a raw material for making aluminium. “Spot alumina prices are now up nearly 40% year to date,” he wrote, adding that the alumina shortage could provide sustained cost support for primary aluminium prices for the rest of 2024.
Among other metals, nickel fell to its seven-week low of $18,240. It was last trading 3.3% lower at $18,435.
Zinc fell 2.1% to $2,873, tin was down 1.2% at $31,535 and lead dipped 0.6% to $2,230.