BEIJING: Copper prices fell on Wednesday as demand uncertainty and a firmer dollar under a higher-for-longer interest rate policy by the US Federal Reserve outweighed supply disruptions.
Three-month copper on the London Metal Exchange lost 0.7% to $8,880 a tonne by 0756 GMT.
Citi Research has lowered its copper price forecast to $8,500 per tonne, from previous outlook of $10,000. “Our economists believe US inflation will remain firmer than anticipated, necessitating three further 25-basis-point Fed rate hikes. China growth could also disappoint amid continued property sector struggles and weak consumer confidence,” it said in a note.
Copper demand is expected to remain subdued in the first quarter, a typically off-peak season, while some participants eyed a possible recovery from the second quarter.
“Prices are closely linked to consumption.
Signs like increasing orders from end-users for copper tubes and rods are something we are waiting to see,” said a Chinese futures trader. China’s central bank ramped up medium-term liquidity injections as it rolled over maturing policy loans on Wednesday, while it kept the interest rate unchanged, matching market expectations.
The most-traded March copper contract on the Shanghai Futures Exchange ended day trading 0.2% higher at 68,640 yuan ($10,027.90) a tonne. Many investors eyed more policy support from China’s “Two Session”, to be held in early March, but those who were bearish cited a likely stronger dollar.
The dollar found some support after stubbornly high US inflation signalled that interest rates are going to remain high for longer than investors had expected. Should the dollar index rise above 105, copper prices might retreat to 66,000 yuan, according to Nanhua Futures, expecting prices to fluctuate in the following weeks.
Meanwhile, production and logistics disruptions amid political unrest in copper-rich South American countries and extreme weather conditions in Indonesia have raised concerns in China.
LME aluminium slid 0.5% at $2,396.50 a tonne, lead shed 0.5% to $2,085, tin was down 1.4% at $26,430, and zinc fell 1.2% down to $3,046. SHFE aluminium fell 1.3% to 18,315 yuan a tonne, zinc eased 0.9% to 22,860 yuan, lead nudged 0.2% down to 15,230 yuan a tonne, tin shed 3.1% to 210,350 yuan a tonne, and nickel lost 0.8% to 205,060 yuan a tonne.
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