Copper retreats on profit-taking, weak physical demand

Copper retreated on Wednesday as funds took profit after prices hit a record high and depressed physical consumption.

Three-month copper on the London Metal Exchange (LME) CMCU3 extended losses in the afternoon to drop 3.9% to $10,440 per metric ton as of 1655 GMT, dropping the most in two years.

Corrections are likely to be short-lived with funds remaining in long positions, a trader said.

“I would be surprised if funds run away without a fight,” the source added.

Copper price is still up 22% so far this year, after speculative frenzy propelled it to a historic high of $11,104.5 on Monday.

It has already choked off demand in top consumer China, with copper fabricators cutting production.

“We understand that more than 500,000 tonnes of unsold copper wire rod inventory has accumulated at producers since March,” BNP Paribas’ David Wilson said at note on Tuesday.

Copper is used in making wires and cables due to its good conductivity.

Copper inventory in the warehouses monitored by Shanghai Futures Exchange (SHFE) remained at close to 300,000 tonnes, as seasonal withdrawal was slower than usual.

China’s April refined copper output rose, dismissing concerns over major smelters’plan to cut production in March.

Chinese copper sellers are paying their buyers to get rid of stocks, as domestic premium turned negative, according to Shanghai Metals Market SMM-CU-PND.

The most-traded June copper contract on the Shanghai Futures Exchange (SHFE) SCFcv1 lost 1.1% to 86,220 yuan ($11,910.65) a ton.

The front-month contract on Chicago Mercantile Exchange (Comex) also dropped 5.2% to $4.854 per pound.

The dollar rose slightly on Wednesday, as the market awaited the publication of U.S. central bank’s minutes on interest rate decision.

A stronger dollar makes greenback-priced commodity costlier for holders of foreign currency.

A broad sell-off was seen across base metals. LME aluminium CMAL3 slid 2.7% to $2,651.5 a ton, nickel CMNI3 dropped 4.2% to $20,400, zinc CMZN3 dipped 2.4% to $3,065.5, tin CMSN3 fell 2.3% to $33,525.

Lead CMPB3 retreated by 1% to $2,313.5 after touching its two-year high of $2,359.
Source: Reuters (Julian Luk; additional reporting by Siyi Liu in Beijing; Editing by Tasim Zahid and Ravi Prakash Kumar)