LONDON: Copper prices hit a two-month low on Wednesday as the dollar held firm and weak demand prospects in top consumer China dominated the mood, while the market waited for US inflation data.
Benchmark copper on the London Metal Exchange (LME) traded 0.2% down at $9,103 a metric ton in official rings from an earlier session low of $9,082.5, a drop of more than 6% since the US presidential election last week.
“The dollar shows no signs of giving up its gains and China stimulus hasn’t done much for manufacturing, real estate or growth,” a copper trader said. US consumer price inflation data due later on Wednesday will be scanned for clues to the frequency and magnitude of future US Federal Reserve rate cuts. The US currency trading near 6-1/2-month peaks makes dollar-priced metals more expensive for holders of other currencies, potentially subduing demand. Disappointment with Chinese stimulus in recent months combined with the likelihood of hefty US tariffs on imports after Donald Trump’s presidential election victory are expected to keep copper and other industrial metals under pressure.
Trump has threatened 60% tariff on goods coming into the United States from China, much higher than the levies of 7.5% to 25% he imposed in his first term. “We see a new bear risk - expanded China-centred tariffs, imposed by the incoming Republican party,” said Liberum analyst Tom Price. “Tariffs were bearish for the commodity world in 2018-19. They will be bearish again.”
An indication of muted demand in China is the Yangshan premium, a closely watched indicator of China’s appetite for importing copper, down 30% to around $46 a ton since rising to nearly $70 in early October. Overall, subdued demand globally has been the main theme in industrial metals market for most of this year. It is reflected in the persistent discounts for the cash over the three-month LME contracts. Aluminium fell 0.5% to $2,549 a ton, zinc ceded 0.1% to $2,935, lead slipped 0.1% to $2,021, tin retreated 0.8% $29,950 and nickel shed 0.4% to $15,840.