Copper prices saw a boost on Monday due to a weaker dollar and positive data from China’s manufacturing sector. The lower value of the US currency made dollar-priced metals cheaper for holders of other currencies, leading to increased copper buying by funds. Despite this, concerns about demand in the top consumer market, fueled by rising inventories, limited gains in copper prices. Benchmark copper on the London Metal Exchange (LME) rose 0.6% to $9,615 a metric tonne, although prices have declined more than 10% since reaching all-time highs in May.
While funds are helping support copper prices, there is a need for sustained improvements in fundamentals for copper to rebound to previous peaks, according to a copper trader. Data from a private survey showed that factory activity among smaller Chinese manufacturers grew at the fastest pace since 2021, driven by overseas orders. However, weak domestic demand and industrial contraction tempered optimism regarding China’s manufacturing sector. Copper stocks in LME-registered warehouses have increased by nearly 75% since May and are currently at their highest levels since December. Additionally, stocks in Shanghai’s bonded warehouses have also seen a significant increase compared to January.
Analysts expect continued price pressures on copper due to weak demand in China, particularly in sectors like construction. BNP Paribas analyst David Wilson predicts further inventory builds in LME warehouses. A similar outlook is seen for nickel prices, with expectations of a downward trend through the second half of 2024. LME nickel stocks have more than doubled since early November, reflecting an increasing oversupply in the market. Despite this, nickel prices were up 0.1% at $17,315.
In addition to copper and nickel, other metals also saw positive movements on Monday. Aluminium gained 0.3% to $2,531, zinc rose 0.9% to $2,962, lead climbed 0.1% to $2,227, and tin advanced 0.8% to $32,995. These increases in other metals suggest a broader trend of price movements influenced by various factors, including global economic conditions, trade dynamics, and market sentiment.
Overall, the recent fluctuations in copper prices reflect a complex interplay of factors such as currency movements, demand trends, and supply dynamics. While a weaker dollar has supported copper prices, concerns about demand in China and rising inventories have created a challenging environment for the metal. The outlook for copper and other metals remains uncertain, with analysts closely monitoring key indicators and data points to assess future price movements in the commodities market. As global economic conditions continue to evolve, market participants will need to adapt to changing dynamics and anticipate potential shifts in metal prices in the coming months.
