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Copper prices faltered on Tuesday, unsettled by worries about the knock-on impact of a U.S. banking crisis, a stronger dollar and a slow recovery of demand in top metals consumer China.
Three-month copper on the London Metal Exchange shed 0.6% to $8,878.50 a tonne by 1130 GMT after rising by 0.7% on Monday.
LME copper has dropped 7% since touching a seven-month peak of $9,550.50 a tonne in January, mainly due to concern about demand in China and climbing global interest rates.
“It’s still the headlines about the U.S. banks that’s the dominating factor today, creating broad risk-off sentiment across markets. So far the contagion to metals is limited but, we’re closely watching these events,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International.
Global shares tumbled along with oil and other risky assets, hit by continued concern about the implications of three U.S. banks having collapsed in less than a week.
A stronger dollar index also weighed on the metals market, making commodities priced in the U.S. currency more expensive for buyers using other currencies.
Uncertainty about the pace of recovery of metals demand in China was also undermining prices.
“In China, we’re seeing very tentative signs of improving demand, but it’s still going to take weeks or even a month or two to recover,” Fu said.
The most-traded April copper contract on the Shanghai Futures Exchange fell 0.6% to 68,550 yuan ($9,974.83) a tonne.
The Yangshan copper premium rose to $25 a tonne on Monday, its highest since March 1, indicating improving demand for imported copper into China, albeit still far below some $150-a-tonne premium hit last October.
Analysts expect Chinese copper demand to improve in late March or from the second quarter following the easing of COVID-19 restrictions.
LME nickel bucked the weaker trend and gained 2.3% to $23,655 a tonne after LME on-warrant inventories – material that is not earmarked for removal – fell to a one-year low of 38,610 tonnes.