LONDON: Copper prices stumbled on Wednesday to the lowest in over three weeks on concern about weak industrial profits in top metals consumer China and further US rate hikes dampening economic growth and metals demand.
Three-month copper on the London Metal Exchange had shed 1.2% to $8,263 per metric ton by 1600 GMT after touching the weakest since June 5 at $8,212, having retreated from a two-month high touched last week.
“The Chinese data is basically adding to the pressure that started on Friday when we quite abruptly broke that uptrend that was established at the end of May,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“The traders had been chasing the copper market for the last three weeks, but when the market gave up the upside on Friday, they were caught long and wrong once again.” Data on Wednesday showed annual profits at China’s industrial firms extended a double-digit decline in the first five months as softening demand squeezed margins.
Investors were also unsettled about the implications of strong US data on Tuesday, which showed the housing market regaining strength while consumer confidence hit a 17-month peak.
“That is forcing the Fed to be on the hawkish side and the market doesn’t like that, hurting sentiment across the board,” Hansen added.
Metals came under further pressure when Federal Reserve Chairman Jerome Powell did not rule out more rate hike action at the central bank’s next meeting.
That sparked a strengthening in the dollar index, making commodities priced in the US currency more expensive for buyers using other currencies.
The downside in copper, however, was cushioned by tight inventory levels.
Global exchange copper stocks sank to 15-year lows, stoking concerns about supply especially if demand in top buyer China starts to pick up following the roll-out of further stimulus.
LME aluminium fell 1% to $2,173.50 a metric ton, zinc shed 1% to $2,363.50, lead slipped 1% to $2,076.50, nickel tumbled 3.4% to $20,090 after hitting a near one-year low while tin dropped 0.8% to $26,080.