Copper in weekly loss over strong dollar, high inventories

By Onome Amuge.

Copper prices plunged to a weekly loss, pressured by a strong dollar, high inventories and reduced risk appetite amid concerns over Federal Reserve policy and a disappointing Chinese economic recovery.

Three-month copper on the London Metal Exchange (LME) was up 1.0 per cent at $8,272 per metric tonne, but a 1.8 per cent drop the previous day saw the red metal tumble to its deepest daily decline since Aug 1.

Copper stocks held on the London Metal Exchange (LME) have more than doubled in the space of two months, indicating falling demand. Inventories of the red metal on the exchange now stand at 162,900 tonnes, according to the latest LME daily data, after 7,200 tonnes of the metal were delivered to LME warehouses in Hamburg, Rotterdam and New Orleans. So far in September, inventories are up by more than 50 per cent, following a similar rise in August.

Meanwhile, worries over China’s real estate sector continue to escalate after Moody’s Investors Service put two of the country’s strongest property developers – China Jinmao Holdings Group and China Vanke – on review for possible downgrades.

According to reports, Beijing rolled out a set of stimulus measures, reducing down-payment requirements for homebuyers and allowing lenders to lower rates on existing mortgages, resulting in a spurt of homebuying earlier in the month, however that is already losing momentum.

As it stands, China’s recovery is still uncertain, with anything related to real estate continuing to struggle. For copper, risks remain to the downside heading into the year’s end on China’s uncertain outlook for the property sector.

In the longer term, analysts said the copper market should find support from demand from the green energy transition and economic stimulus in China, the world’s top metals consumer.

For other base metals, LME aluminium was up  1.2 per cent to $2,238 a tonne, nickel  was 1.2 per cent higher at $19,360 a tonne,Zinc gained 1.8 per cent at $2,558.5, lead added 1.0 per cent to $2,205 and tin firmed 0.1 per cent to $25,635.