Copper falls on firmer dollar ahead of central bank meetings
Decline in copper prices:
BEIJING (Dec. 12): Monday saw a decline in copper prices from almost six-month highs as the US dollar strengthened and traders exercised caution ahead of important central bank meetings that may reveal further information on the trajectory of global economic growth and metals demand.
Copper contract:
The most actively traded January copper contract on the Shanghai Futures Exchange fell 1% to 66,140 yuan (US$9,508.47) per tonne, while three-month copper on the London Metal Exchange fell 1.1% to US$8,448.5 a tonne by 0124 GMT.
The Dollar strengthened as a result:
The dollar strengthened as a result of data showing that producer prices in the US increased more than anticipated last month, indicating ongoing inflationary pressures and igniting concerns that the Federal Reserve could need to maintain higher interest rates for longer.
A higher dollar increases the price of the metal in foreign currencies holders.
Investors anticipated :
As investors anticipated China's relaxation of its Covid-19 limitations would spur global economic development and metals demand, copper prices reached their highest level since June on Friday.
Investors are preparing expecting the Fed to raise rates by half a percentage point this week, a reduction from its previous string of rises of three quarters of a percentage point.
Interest rate increases are expected:
Additionally, interest rate increases are expected to be announced by the European Central Bank and the Bank of England.
Due to declining ore grades at its Chilean operations, global miner Anglo American plc reduced its projected copper production for 2023 on Friday. It also lowered its upper end output objective for 2022.
Aluminum:
Aluminum on the LME down 1.4% to US$2,446 per tonne, zinc fell 0.8% to US$3,215 per tonne, lead fell 1.2% to US$2,174 per tonne, and tin fell 2% to US$23,805 per tonne.
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Aluminum on the SHFE dropped 1.9% to 18,860 Yuan a tonne, zinc dropped to 24,790 Yuan, nickel dropped to 218,190 Yuan, and tin dropped to 190,980 Yuan.
Impending shortages and Conclusion:
In response to concerns about impending shortages and hopes that industrial demand will increase in top consumer China, copper futures increased to $3.9 a pound, hovering close to levels last observed in June. Concerns about shortages in the near future have increased due to lower supply in South America, where the output from the region's biggest producer Chile fell 6.7% in the first three quarters of the year and mining protests in Peru hinder production. Commodity broker Trafigura issued a warning that global copper stocks had reached historic lows, with current supplies only sufficient to meet global demand for 4.9 days. Mining behemoth Glencore also predicted a supply shortage of 50 million tonnes by 2023. Prices were also bolstered by lower Covid limitations in China, which fueled expectations of increased demand. Additionally, the PBOC reduced its reserve ratio by 25 bps to boost business activity and counteract growing indications that the economy is faltering.
