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Copper prices fell to their lowest in more than two weeks on Monday as the market focused on lacklustre demand in top consumer China while a softer dollar helped to cap losses.
Benchmark copper CMCU3 on the London Metal Exchange (LME) was up 0.1% at $8,803 a tonne by 1004 GMT, having earlier touched $8,752.50 for its lowest since April 5.
Hopes for stronger copper demand in China after the removal of COVID restrictions have proved forlorn so far, with activity in the manufacturing sector sector growing more slowly than expected.
“China reopening euphoria has faded. This is not a surprise as we thought from the beginning that this recovery would be services driven,” Julius Baer analyst Carsten Menke said, adding that an inventory overhang of manufactured goods was also weighing on demand.
Weak demand in China can be seen in the Yangshan copper premium SMM-CUYP-CN, which has more than halved to $23 a tonne since March 17.
“For 2023, on the bearish side, U.S. and European policymakers are trying to drive down inflation with monetary policy, likely resulting in weaker lending growth, capex investment and activity in the developed markets,” Citi analysts said in a note.
“This is set to combine with higher scrap and mine supply, as well as supply chain destocking during 2023.”
Elsewhere, traders are focused on the large holdings of warrants and cash contracts for LME lead 0#LME-WHC, which has fuelled worries about near-term supplies and created a hefty premium for cash metal over the three-month contract.
The premium CMPB0-3 hit $35.25 a tonne on Friday for its highest since early January. It was last at $32.50 a tonne.
Three-month lead was down 1% at $2,140.
Industrial metals found some support from the dollar, which has fallen on perceptions that the U.S. Federal Reserve will raise interest rates less aggressively than previously expected.
A weaker U.S. currency makes dollar-priced metals cheaper for buyers holding other currencies.
In other metals, aluminium CMAL3 slipped 1.1% to $2,371 a tonne, zinc CMZN3 ceded 1.1% to $2,690, tin CMSN3 gained 0.2% to $26,650 and nickel was down 0.5% at $24,350.