Copper prices slip as China cools growth and credit plans

LONDON: Copper fell on Monday on indications that top consumer China could pull back on credit expansion after it also disappointed with modest growth targets, though analysts remained positive on the metal's long-term fundamentals.

China is widely expected to rein in coronavirus-induced stimulus and cool credit growth to contain debt risks while maintaining support for ailing small firms. It has also set modest growth targets.

"The trigger for lower prices came from the latest communication from the Chinese government that disappointed investors," said Gianclaudio Torlizzi, partner at consultancy T-Commodity, adding that China was concerned about debt levels.

Copper will likely fall in the next few weeks due to a lack of immediate bullish drivers, but the move to a lower carbon economy - in which the metal, widely used in renewable energy systems, is a key beneficiary - will be supportive, he said.

Three-month copper on the London Metal Exchange (LME) declined 1.4% to $8,883 a tonne by 1230 GMT, erasing the previous sessions 1.1% gain.

The metal is used in power and construction, making it a widely used gauge for the health of the global economy.

CHINA CREDIT: "In line with the goal of supporting growth, the government's planned fiscal consolidation in 2021 will be more modest than we had previously anticipated," ratings agency Fitch said.

POSITIONING: The LME net speculative long has fallen to 46% of open interest on Friday from 62% on Feb. 25, which was its highest since 2004, according to estimates by broker Marex Spectron.

DOLLAR: The dollar backed away from 3-1/2 month highs on Tuesday as US Treasury yields stabilised.

CHINA METALS: The head of China's base metals body on Tuesday said the industry should pay close attention to the risk of speculators driving prices away from fundamentals, warning that sharp fluctuations would "do more harm than good".

OTHER PRICES: Aluminium fell 2.1% to $2,124.50 a tonne, zinc fell 0.9% to $2,757, lead shed 0.1% to $1,977, and tin added 0.9% to $24,550. Nickel lost 2.3% to $15,970, after touching its lowest since November 2020.