LONDON: Base metals resumed their climb on Wednesday as the dollar slipped and on concerns that the global power crunch could hit already thinning inventories.
The power crunch in China and electricity price hikes in Europe have raised concerns about supply shortages in base metals, some of which have inventory levels at multi-year lows.
Benchmark copper on the London Metal Exchange (LME) was 0.5% higher at $10,193 per tonne by 1610 GMT, having earlier fallen as low as $9,908.50 after China’s state planner said it was looking at ways to cool record high coal prices.
“There is very tight inventory for copper at the moment and that is still a concern”, said Xiao Fu, head of commodity market strategy at Bank of China International (BOCI) in London.
Low inventories on the LME system pushed prices for copper to a high of $10,452.50 per tonne on Monday, close to the record of $10,747.50 touched in May.
The premium of LME cash copper over the three-month contract moderated to about $157 per tonne versus a record high of $1,103.50 touched on Monday, pointing to an easing in concerns over quickly deliverable metal.
On-warrant stocks of copper available to the market in LME-registered warehouses inched up 2,650 tonnes to 17,875 tonnes, still hovering near their lowest level since 1998.
Inventories in Shanghai Futures Exchange (ShFE) warehouses are at their lowest since 2009 at 41,668 tonnes.
“With official warehouse inventory yet to see any meaningful builds from their extremely low levels and with the tight energy situation likely to rear its ugly head again in the near future, we are of the opinion these metals should find support and we are already seeing evidence of that,” said Alastair Munro at brokerage Marex.
LME ACTION: The LME said it would amend lending rules and implement a backwardation limit and delivery deferral mechanism for copper trading with immediate effect.
Trafigura said it was not the only commodities trader to order withdrawals of copper inventories from the LME. OTHER METALS: LME aluminium fell 1.2% to $3,074 a tonne, zinc added 1.6% to $3,565, lead shed 0.8% to $2,356, tin was steady at $37,700 and nickel was down 0.5% at $19,955.