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Tuesday, May 17, 2022

Copper slides, caution prevails ahead of Fed meeting

LONDON: Copper prices fell on Tuesday alongside other commodities due to caution ahead a meeting of the US central bank, but worries about shortages and historically low stocks supported sentiment.

Benchmark copper on the London Metal Exchange was down 0.4% at $9,515 a tonne at 1704 GMT. Prices of the metal used in the power and construction industries have fallen 9% over the last two weeks.

“China’s efforts to boost coal supplies have alleviated some fears about the power crunch and metal supplies,” said Citi analyst Oliver Nugent.

“There are still plenty of bottlenecks in the system. There are units stuck along the supply chain in places like Africa and shipping problems mean copper and other metals are taking longer to get to places where they are needed.”

UNITED STATES: The US Federal Reserve meets on Wednesday.

Fed officials are expected to approve plans for scaling back their current $120 billion in monthly bond purchases and phase them out completely by the middle of next year – a first step towards higher rates next year.

Tighter policy would raise the cost of borrowing and potentially slow growth.

It would also boost the US currency which, when it rises, makes dollar-priced commodities more expensive for holders of other currencies.

STOCK: Stocks of copper in LME registered warehouses at 123,925 tonnes have halved since late August.

More worrying for consumers are cancelled warrants — metal earmarked for delivery — at 74%, suggesting another 92,250 tonnes is due to leave LME warehouses over coming days.

Concern is reflected in the high premiums for the cash over the three-month copper contract at $338 a tonne.

This is down from levels above $1,000 on October, but it is still a historically high number.

“You only really find out how extreme the situation is when you get to big expiries on the third Wednesday of the month,” Citi’s Nugent said.

OTHER METALS: Aluminium was down 1.1% at $2,689 a tonne, zinc slid 0.7% to $3,340, lead fell 0.2% to $2,373, tin lost 0.1% to $36,915 and nickel ceded 0.5% to $19,605.

Copper slides, caution prevails ahead of Fed meeting

Source: Brecorder

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