Copper resumes downtrend on supply overhang and weak demand

Copper prices slipped on Friday on concern over surplus supplies and sluggish demand in top metals consumer China, where the currency is also weakening.

Three-month copper CMCU3 on the London Metal Exchange fell 1.6% to $9,700 a metric ton in official open-outcry trading after three days of gains.

The metal used in power and construction has shed 13% since touching a record peak above $11,100 last month.

“The market has been trying to figure out whether the correction phase is coming to an end, but I think it’s still too early to call a turnaround,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“We need data, especially Chinese data, to be more supportive.”

China’s yuan dipped to a seven-month low against the dollar on Friday, hurt by portfolio outflows from mainland financial markets and speculation that the central bank is allowing the currency to weaken gradually.

A weaker yuan usually weighs on industrial metals because it makes commodities priced in the dollar more expensive for buyers in China.

But Hansen said there may be mixed impact at the moment because it may have also spurred some stockpiling.

Brokers in Asia said the drop in copper prices have encouraged more physical purchases this week and provided support around $9,500 to $9,600 a ton.

The most-traded July copper contract on the Shanghai Futures Exchange SCFcv1 closed 0.5% down at 79,120 yuan ($10,896.42) a ton.

An overhang of metals has been weighing on the copper market, with SHFE copper stocks showing a tenfold surge since the start of the year to 330,753 tons on June 14, reflecting the abundant supply in top consumer China.

Data showed the global refined copper market had a surplus of 13,000 tons in April and excess supply of 299,000 tons in the first four months of the year.

In other metals, LME aluminium CMAL3 eased 0.7% in official activity to $2,503 a ton, nickel CMNI3 fell 1.3% to $17,190, zinc CMZN3 shed 1% to $2,844, lead CMPB3 dropped 1.4% at $2,185 and tin CMSN3 was down 0.6% at $32,875.
Source: Reuters, Reporting by Eric Onstad (Additional reporting by Mai Nguyen in Hanoi, Editing by David Goodman)