Chinese demand fears haunt copper market

LONDON: Copper prices fell on Monday after top consumer China reaffirmed its stringent COVID-19 restrictions and data from the top consumer reinforced demand worries, but sliding inventories and a lower dollar limited losses.

Benchmark copper on the London Metal Exchange was down 2.2% at $7,918 a tonne at 1703 GMT. Prices of the metal used as a gauge of economic health jumped more than 7%, the largest one day gain since January 2009, on Friday as traders cut short positions because of talk that China would soon loosen its strict COVID measures.

“China’s zero-COVID policy is not the only problem,” said Julius Baer analyst Carsten Menke. “Removing that policy won’t fix the property market ... wiring in buildings and households account for a large proportion of copper demand.” China’s property market continued its slump in October, with private data showing home prices and sales falling, while trade data showed imports of unwrought copper and copper products fell 1.5% in October from the same period a year ago.

The country’s zero-COVID approach and lockdowns has squeezed its manufacturing sector and hit demand for industrial metals.

“Easing lockdowns ahead of winter – as China’s covid infections are rising – seems an irrational bull case for investors,” Liberum analyst Tom Price said in a note.

However, sliding stocks in LME registered warehouses, which at 84,550 tonnes are down more than 40% since mid-Oct, are supporting copper prices on the exchange.

Cancelled warrants — metal earmarked for delivery — at 46% of the total — further reinforce worries about tight copper supplies on LME market. This is reflected in the premium for the cash over the three-month contract.

Another boost for industrial metals came from the lower US currency making dollar-priced metals cheaper for holders of other currencies, potentially raising demand and prices.

In other metals, aluminium was down 1% at $2,333 a tonne, zinc gained 0.2% to $2,880, lead rose 1.6% to $2,030, tin gained 1.3% to $19,110 and nickel ceded 1.8% to $23,390.