METALS-Copper buoyed by dollar, but China demand worry dominates

Reuters · 07/01 10:20
METALS-Copper buoyed by dollar, but China demand worry dominates

Updates prices

By Pratima Desai

- Copper prices firmed on Monday due to support from a weaker dollar and some stronger data from China's manufacturing sector, but worries about demand in the top consumer fuelled by climbing inventories capped gains.

Traders said the lower U.S. currency, which makes dollar-priced metals cheaper for holders of other currencies and could boost demand, had triggered a flurry of copper buying by funds.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was up 0.4% at $9,635 a metric ton at 1604 GMT. Prices of the metal used in power and construction have dropped more than 10% since hitting all-time highs of $11,100 in May.

"Funds are helping copper keep its head above water, but we to see a sustained improvement in fundamentals for copper to recover towards recent peaks," a copper trader said.

Factory activity among smaller Chinese manufacturers grew at the fastest pace since 2021 thanks to overseas orders, a private survey showed. However, optimism was tempered by a broader survey suggesting weak domestic demand and industrial contraction.

Copper stocks in warehouses MCU-TOTAL registered with the LME at 180,050 tons have climbed 75% since May 16 and are at their highest since December.

Meanwhile, stocks in Shanghai's bonded warehouses SMM-CUR-BON at 90,700 tons are up from around 9,000 tons in January.

"We continue to expect price headwinds through...on continued demand weakness in China, from traditional end–use sectors such as construction. We expect to see further inventory builds in LME warehouses," BNP Paribas analyst David Wilson said.

"We continue to forecast the price to trend lower through the second half of 2024, to end the year at $16,750/t, on increasing oversupply and ongoing inventory builds."

LME stocks MNI-STOCKS at 95,436 tons have more than doubled since early November.

Nickel CMNI3 was up 0.9% at $17,450.

In other metals, aluminium CMAL3 slipped 0.5% to $2,513, zinc CMZN3 was down 0.7% to $2,918, lead CMPB3 fell 0.2% to $2,220 and tin CMSN3 gained 0.5% to $32,900.

(Reporting by Pratima Desai; editing by Vijay Kishore and Louise Heavens)


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