LONDON: Copper prices sank on Monday as the market fretted over surpluses of the industrial metal, rising stocks, poor demand prospects in top consumer China and a firmer dollar.
Benchmark copper on the London Metal Exchange (LME) had fallen 1% to $8,485 a tonne by 1601 GMT. Traders said selling picked up momentum after the New York market opened.
Data from the International Copper Study Group showed there was a market surplus of 287,000 tonnes in the January-May period.
“Buying enthusiasm for copper has been muted by the fact that there is quite a bit of copper on the market right now,” said Edward Meir, an analyst who provides research for brokerage firm Marex.
“We expect a lower dollar and falling US rates … to help the upside, as could rising mining costs and ongoing labour issues. However, we are still not seeing much demand out of China or the rest of the manufacturing world for that matter.”
The Yangshan copper premium, which indicates demand for Chinese copper imports, fell last week to $29 a tonne, the lowest since May 18. It was last at $31.50, down 40% over the past month.
Copper supplies are expected to improve in August as many smelters resume production after summer maintenance and because of the opportunity to reap increased profit thanks to high treatment and refining charges for copper concentrate processing.
Copper inventories in LME-approved warehouses are up nearly 50% since July 12 at 79,325 tonnes.
On the technical front, the upside barrier for copper is around $8,455, where the 21, 100 and 200-day moving averages are converging.
Clues to the direction of the dollar are expected on Thursday with inflation data that could influence the US Federal Reserve’s monetary policy decisions.
However, Monday’s strengthening of the US currency, which makes dollar-denominated commodities more expensive for holders of other currencies, weighed on industrial metals overall.