Copper hits one-month low, focus on weak demand in China

Copper prices fell to one-month lows on Thursday as the generally higher dollar and a sharp drop in imports by top consumer China fuelled worries about demand. Benchmark copper on the London Metal Exchange closed up 0.1 percent to $5,519 a tonne from an earlier session low at $5,419.5, its lowest since November 18. However, prices are up more than 15 percent so far this year and on track for the first annual rise since 2012.
Chinese measures to stimulate its economy have helped to increase industrial metals prices this year but in recent weeks they have been boosted by funds, which trrade using trend-based models. However, after the US Federal Reserve raised its lending rates on December 14 and adopted a more hawkish stance on monetary policy next year, industrial metals have come under pressure as funds cut bets on higher prices.
The higher US currency makes dollar-denominated metals more expensive, which could potentially subdue demand, and it also tightens liquidity in China. "The higher dollar has triggered financial stress in Chinese markets. The tightening of monetary conditions undermines base metals," said Danske Bank analyst Jens Pederson. "There is upward pressure on Chinese money market rates, which could be an indication the central bank is intervening to stop the yuan from falling against the dollar ... This is something that could extend into next year."
Copper in recent days has also come under pressure from rising stocks in LME-approved warehouses, which at 335,800 tonnes, are up nearly 60 percent since December 8. Lower imports of refined metals by Chinese firms reinforced the negative sentiment. China's copper imports tumbled to 276,730 tonnes in November, down 22.86 percent from the same month last year, nickel imports plunged 38.8 percent to 16,919 tonnes and zinc imports slumped 63.5 pct to 25,424 tonnes.
"Not helping the mood were the latest Chinese metal trade numbers," said INTL FCStone analyst Edward Meir in a note. Aluminium prices closed down 0.2 percent at $1,722 a tonne and zinc rose 0.4 percent to $2,630 a tonne. Zinc is up nearly 80 percent since the January lows on expectations of tight supplies and large deficits of both concentrate and metal. Tightness has been highlighted by Chinese smelters agreeing to record low treatment charges or fees to turn concentrate into metal. Lead slid 2.7 percent to $2,124, tin gained 0.2 percent to $20,940 and nickel slipped 1.2 percent to $10,730 a tonne.