LONDON: Copper prices fell on Monday as worries about demand in top consumer China due to new coronavirus restrictions, and elsewhere because of interest rate rises and a stronger dollar, triggered a sell-off.
Benchmark copper on the London Metal Exchange (LME) was down 2% at $7,648 a tonne at 1123 GMT.
Prices of the metal used widely in the power and construction industries have dropped more than 40% since hitting a record high of $10,845 a tonne in March.
“There was a bit of a rally last week, but the market is struggling again,” said Liberum analyst Tom Price.
“China is trying to stimulate, but at the same time it has a zero-COVID policy. The growth outlook isn’t great.”
Multiple Chinese cities are adopting COVID-19 curbs from business halts to lockdowns to rein in new infections, with the commercial hub of Shanghai bracing for another mass testing campaign.
Strong monthly jobs data from the United States has reinforced expectations of another 75 basis point rate hike when the Federal Reserve meets later this month.
China’s June copper output flat on prior month
This has boosted the U.S. currency to near 20-year highs against a basket of other currencies, making dollar-priced industrial metals more expensive for consumers and weighing on demand.
“Funds are selling on the dollar and China,” a metals trader said, adding that the jump in new bank lending in China was a positive for industrial metals. “But (China’s) property sector will be key to future metals demand.”
Clues to industrial metals demand in China will come later this week from data on imports, exports, house prices, urban investment and industrial output.
Highlighting weak copper demand are rising stocks in warehouses monitored by the Shanghai Futures Exchange and LME-approved warehouses.
Elsewhere in the base metals complex, aluminium was down 0.3% at $2,428, zinc ceded 0.9% to $3,072, lead gained 0.8% to $1,932, tin rose 0.5% to $25,500 and nickel slipped 1.1% to $21,350 a tonne.
“We see the next big move lower in metals as being driven by a recession scenario, most notably in Europe,” analysts at Citi said in a note, adding that the $3,000 a tonne drop in the copper price would reduce scrap supply.