LONDON: Copper prices slumped on Wednesday on worries of more central bank rate hikes that could curb economic activity and sluggish demand in top metals consumer China.
Three-month copper on the London Metal Exchange was down 1.1% to $9,097 a tonne at 1030 GMT after rising on Tuesday to its highest since Feb. 2.
Stocks and oil prices were also weak ahead of the release of minutes from the U.S. Federal Reserve’s meeting of Jan. 31-Feb. 1, due at 1900 GMT.
“People are waiting for the Fed minutes later today and I think the market is now anticipating three more hikes this year instead of only one more hike,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International.
U.S. business activity unexpectedly rebounded to an eight-month high in February, data showed on Tuesday, suggesting the Fed would have to tighten monetary policy more to dampen inflation.
Weak metals demand in China was also weighing on the market.
Copper prices fall on weak China demand
“People are also waiting for more visible signs of a demand recovery in China. At the moment, the purchases are mostly on a hand-to-mouth basis,” Fu said.
“After the recent stock build during the Chinese New Year, which was a bit higher than expected, it takes time to destock.”
The most-traded March copper contract on the Shanghai Futures Exchange ended day trading 0.4% higher at 70,090 yuan ($10,169.91) a tonne.
China’s total copper consumption would rise around 3.5% in 2023 to 14.6 million tonnes, according to Rosealea Yao, an analyst at consultancy Gavekal Dragonomics.
“That improvement has probably already been priced in by the 6%-10% rise in domestic copper prices since the reopening rally started in early November,” she said in a note.
Also dampening the market was a firmer dollar index, making commodities priced in the U.S. currency more expensive for buyers using other currencies.
LME aluminium slid 1.9% to $2,421.50 a tonne, nickel fell 2.6% to $26,415, zinc declined 1.7% to $3,081.50, tin lost 1.3% to $27,175, while lead edged up 0.1% to $2,144.
Comments
Comments are closed.