Copper prices touched their lowest level in more than a month on Monday on worries about global economic growth, but falling inventories and the upcoming peak demand season for industrial metals were seen curbing losses.
"There are some headwinds from a macro perspective after the broader reaction to the PMIs and the Fed last week, but for base metals in particular, there's a limit to how far that narrative can weigh on the complex," said analyst Nicholas Snowdon at Deutsche Bank in London.
Weak factory data in purchasing managers' surveys (PMIs) and an unexpectedly dovish statement from the US Federal Reserve last week, together with an inversion of the US yield curve, stoked fears the world's biggest economy was headed for a recession.
However, fundamental supply-demand conditions are relatively tight in most industrial metals, shown by inventories that have fallen sharply over the past year.
"Given a combination of seasonal demand pick-up in Q2 and the existing inventory picture, it's difficult to see this sell-off being sustained," Snowdon added.
Benchmark copper on the London Metal Exchange dropped to a low of $6,295 a tonne, the weakest since Feb. 19, before recovering to $6,340, a rise of 0.4 percent, in closing open outcry trading.
The premium of cash copper over the three-month contract has weakened further to $2.50 a tonne from a peak of $70 on March 5, indicating more plentiful supply.
LME zinc stocks, which have slid by more than half so far this year, hit a fresh record low of 57,075 tonnes, while nickel stocks fell to their lowest since June 2013, LME data showed on Monday.
Japanese aluminium buyers agreed to purchase supplies for April to June at premiums that are as much as 27 percent higher than the previous quarter, sources said.
Three-month aluminium shed 1.1 percent to finish at $1,883 a tonne. It was trapped in a range, capped by producer selling but supported at the lows by consumer buying, Alastair Munro at broker Marex Spectron said in a note.
"Although clearly the market has been capped into $1,925/50 area by producer activity, ditto any dip into $1,850/75 is likely to uncover a consumer bid," he said.
Any further downside for LME zinc should see support at around $2,760 a tonne, the lower boundary of the hourly upward channel, said Stéphanie Aymes, head of technical analysis at Societe Generale.
"In case of further bullish momentum, next resistance will be at $2,940/$2,990," she added in a note. LME zinc rose 0.6 percent to end at $2,831 a tonne, lead fell 1 percent to close at $2,011, nickel, untraded in closing rings, was bid unchanged at $12,940 while tin was bid down 0.6 percent at $21,300.
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