London copper eases off 6-week high on dollar strength

London copper prices eased from a six-week high on Wednesday, weighed down by a firm dollar, though tight supply amid rising demand is expected to keep the metal underpinned this year.

Three-month copper on the London Metal Exchange CMCU3 was down 0.4% to $9,730 a tonne by 0730 GMT. On Tuesday, prices hit their highest since Nov. 25 at $9,812.

The most-traded February copper contract on the Shanghai Futures Exchange SCFcv1 closed up 0.4% at 70,110 yuan ($11,003.00) a tonne.

The dollar index =USD hovered close to a two-week high hit in the previous session as investors braced for interest rate hikes from the U.S. Federal Reserve by mid-year. The greenback scaled a five-year peak against the Japanese yen. USD/

While a firmer dollar makes greenback-priced metals more expensive to holders of other currencies, an interest rate hike could trim liquidity in financial markets and slow recovery in the world’s biggest economy.

“While we are seeing some additional supply growth with projects entering production stage, we still see stock levels remaining at near historical low levels, which supports the price outlook,” CRU analyst Craig Lang said, adding a 50,000 tonne surplus of refined copper is now seen in 2022, “which is a very small amount.”

“We see an increasing proportion of demand from green energy applications, expected to account for 40% of the growth in refined copper demand in 2022 – this will remain the key demand driver in the coming years.”

On-warrant copper stocks in LME-registered warehouses MCUSTX-TOTAL were at 81,400 tonnes, up from a historic low of 14,150 tonnes in October but far below peaks seen in August 2021.

Stocks in ShFE warehouses CU-STX-SGH last week were at 38,182 tonnes, close to a more than 12-year low of 27,171 tonnes hit in the week ended Dec. 24.

Among other industrial metals, LME aluminium CMAL3 edged 0.3% higher to $2,848.5 a tonne, nickel CMNI3 slipped 1.5% to $20,825 a tonne, lead CMPB3 eased 0.3% to $2,291 a tonne, tin CMSN3 fell 0.5% to $39,010 a tonne and zinc CMZN3 fell 0.3% to $3,594 a tonne.

FUNDAMENTALS

* ShFE aluminium SAFcv1 rose 0.7% to 20,380 yuan a tonne, while nickel SNIcv1 gained 0.3% to 152,160 yuan, zinc SZNcv1 was up 1.3% at 24,415 yuan and lead SPBcv1 fell 1.5% to 15,200 yuan. Tin SSNcv1 climbed 1.8% to 295,520 yuan a tonne, having earlier scaled a record peak of 297,900 yuan.

* Chile’s total copper production in November fell by 0.6% year-on-year to 481,800 tonnes, due to drops from state-owned Codelco and the giant Escondida mine, the Chilean Copper Commission reported on Tuesday.

* Indonesian coal miners are due to hold talks with government officials on Wednesday on a ban on the country’s coal exports that has unnerved global markets for the fuel and triggered energy security concerns in some major economies.
Source: Reuters (Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu)