LONDON: Copper prices retreated on Friday on disappointment over the extent of fiscal stimulus measures announced by top metals consumer China to reboot its lacklustre economy.
Three-month copper on the London Metal Exchange (LME) was down 2.3% to $9,441 a metric ton by 1700 GMT after a volatile several days following the US election, including a 3.4% rebound on Thursday. US Comex copper futures dropped 2.8% to $4.31 a lb. The support package announced by China on Friday eases debt repayment strains for local governments and signalled further stimulus in the pipeline for its sputtering economy.
“The market clearly was disappointed; they want more from China,” said Nitesh Shah, commodity strategist at WisdomTree. “The expectations were set very high and there were lots of warm words by officials about fiscal policy support, but markets are growing impatient.” Investors have been worried about threats made by US President-elect Donald Trump to impose stiff tariffs on China, which could dampen metals demand.
“I’m interpreting today’s announcement as, rather than announce large stimulus preemptively, China waiting to see what trade restrictions come and keeping some dry powder aside to stimulate at that point,” Shah added. The most-traded December copper contract on the Shanghai Futures Exchange closed 1.5% up at 77,100 yuan ($10,753) a ton ahead of China’s stimulus announcement.
“The 6 trillion (yuan) announced today to immediately address and resolve local debt, compared to the initial 12 trillion expected, has seen markets sliding,” said a trader in Asia. Also weighing on the market was a firmer dollar, which makes commodities priced in the US currency more expensive for buyers using other currencies. Helping to cushion the losses was weekly data showing copper inventories in SHFE warehouses fell about 9%, a sign of improving demand.
LME nickel dropped 1.2% to $16,385 a ton after inventories extended gains to 150,336 tons, the highest level in more than three years, having doubled over the past seven months.
“Nickel’s short-covering rally paused as stock builds resume in Asian warehouse locations,” said a note from broker Marex. Among other metals, LME aluminium shed 2.8% to $2,620 a ton, zinc gave up 2.4% to $2,977.50, lead lost 0.7% to $2,024 and tin slipped 0.3% to $31,730.