LONDON: Copper rose on Monday as the dollar weakened, but prices remained close to seven-week lows due to a lack of evidence of a healthier demand outlook in top consumer China ahead of key data on the country’s manufacturing sector.
While the dollar fell, it was still hovering near seven-week highs against other major currencies on expectations that US interest rates could peak at a higher level than previously forecast.
A stronger US currency makes dollar-priced industrial metals more expensive for holders of other currencies, potentially subduing demand.
Benchmark copper on the London Metal Exchange (LME) had gained 1.2% to $8,816.50 a tonne by 1745 GMT after earlier touching its lowest since Jan. 9 at $8,670.
Surveys of purchasing managers in China’s manufacturing sector, due this week, are expected to show growth. Purchasing Managers’ indices (PMI) are a strong lead indicator for metals consumption and prices. “There doesn’t seem to have been any uptick in Chinese consumption,” said Sucden Financial analyst Geordie Wilkes.
“We need to see where the strength is coming in the PMIs ... the new orders index is an indicator of fresh demand,” he said.
A sign of weak demand overall is the discount for cash copper against the three-month contract. Copper stocks in warehouses monitored by the Shanghai Futures Exchange have risen 360% to 252,455 tonnes since Dec. 23, suggesting weak Chinese demand. “Many assets rallied as China’s government accelerated the reopening of the economy. Copper ... has had the strongest start to a year since 2003,” said Bank of America analyst Michael Widmer. “Yet this rally has been accompanied by weaker physical markets in China.”
In other metals, aluminium was up 1.5% at $2,370.50 a tonne, zinc rose 1% to $2,994, lead gained 1.7% to $2,106.50, tin was down 0.5% at $25,530 and nickel climbed 3.7% to $25,450.
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