LONDON: Copper sank to its lowest price in a month on Thursday and other base metals also slipped on the prospects of a December US interest rate hike, which boosted the dollar. Zinc and lead touched their weakest levels in nearly a month as metals also felt the impact of persistent worries about global economic growth and soggy metals demand.
“The main driver behind the drop in prices must be the speeches of the Fed officials, driving the dollar higher and weighing on the wider commodity space,” said analyst Daniel Briesemann at Commerzbank in Frankfurt.
Federal Reserve Chair Janet Yellen on Wednesday pointed to a possible December interest rate “liftoff”, sending the dollar surging to a three-month high.
A firmer dollar often curbs demand for commodities, making them more expensive for buyers outside the United States since they are priced in the US currency.
Three-month copper on the London Metal Exchange had slipped 1.9 percent to $ 5,039 a tonne by 1100 GMT, having hit its weakest since Oct. 2 at $ 5,037.50 a tonne.
Shanghai Futures Exchange copper eased 0.8 percent to 38,480 yuan ($ 6,067) a tonne.
A surprise drop in German industrial orders also soured sentiment towards industrial metals. Briesemann noted that the market seemed to ignore a firmer Chinese equity market, which often move in tandem with base metals.
“The market is just concentrating on the negative, ignoring any positive factors.
The mood is very, very negative and as long as this does not change, then we should probably be prepared for even lower prices,” he said.
Analyst Dan Morgan at UBS in Sydney said copper prices have been underpinned by signs that China’s easing measures may be helping the world’s second biggest economy stabilise.
“I’m a little more constructive than others. I do think we’ll see a little bit more grid spending in the next couple of months, which should also be supportive of prices.”
China’s state grid, the country’s biggest copper buyer, is expected to boost spending into the end of the year to meet its 2015 spending pledge.
China’s power sector accounts for nearly 20 percent of global copper demand.
UBS expects copper prices to average at $ 2.40 per pound ($ 5,291 a tonne) in the fourth quarter. LME zinc dropped 1.2 percent to $ 1,661 a tonne and lead shed 1.1 percent to $ 1,663, the weakest in four weeks, while aluminium gave up 0.8 percent to $ 1,494.
Shanghai aluminium premiums slumped to $ 95-$ 115, the lowest in more than three years, amid a domestic glut.