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Copper sell-off continues as prices hit 10-week low

Copper continued to fall on Monday, hitting its lowest level since mid-April after moves by China to rein in commodities price rallies and signals from the U.S. Federal Reserve that it will tighten monetary policy sooner than expected.

Benchmark copper on the London Metal Exchange (LME) was down 0.4% at $9,108.50 a tonne at 1051 GMT, after touching $9,011.

The metal used in power and construction hit a record high of $10,474.50 in May. Prices fell 8.6% last week.

“We’ve sen the top, and the trend is to the downside,” said Commerzbank analyst Daniel Briesemann, predicting that prices would average $8,000-$8,500 in the third quarter of the year.

STOCKS/DOLLAR/YUAN: The Fed’s change in tone has hit riskier assets and boosted the dollar, making metals costlier for buyers using other currencies. Global stocks touched a four-week low on Monday and China’s yuan fell sharply.

CHINA CRACKDOWN: Iron ore futures in Asia tumbled after Chinese authorities launched an investigation into spot trading.

The probe is the latest step by China to keep a lid on surging commodities prices. Last week, it said it would sell industrial metals including copper from its national reserves.

RALLY: Copper surged almost 150% between March 2020 and May 2021 as speculators bet demand in infrastructure and electrification would overwhelm supply.

POSITIONING: Speculators cut their net long position in LME copper to 10% of active contracts by Thursday, brokers Marex Spectron said. The net long in Comex futures has more than halved this year to its lowest since June 2020.

CHINA OUTPUT: China’s production of copper, alumina, lead and zinc rose in May, official data showed.

INFRASTRUCTURE: A bipartisan U.S. infrastructure plan costing a little over $1 trillion has been gaining support in the U.S. Senate.

OTHER METALS: LME aluminum was down 0.6% at $2,371 a tonne, zinc was up 0.3% at $2,830.50, nickel rose 1.1% to $17,335, lead gained 0.2% to $2,162 and tin was down 0.6% at $29,690.
Source: Reuters (Reporting by Peter Hobson Additional reporting by Mai Nguyen Editing by Alexander Smith)

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