Due to sluggish Chinese demand, a stronger dollar, and a substantial increase in stockpiles in the London Metal Exchange (LME) warehouse system, copper prices on Tuesday plummeted to their lowest levels in six weeks. At 1646 GMT, benchmark LME copper was down 2.4% at $8,524.50 per tonne, on pace to lose money for the sixth day in a row. Electrical wiring metal prices have decreased since reaching a seven-month high of $9,550.50 in January.
A weaker-than-expected comeback in demand from top customer China and a bleak economic outlook abroad are the causes of the price decline. After last week’s first-quarter GDP figures showed an uneven comeback and trailing industry and property activity, Chinese stock markets plummeted for a fifth day.
Investor caution caused stock markets to fall globally and increased the value of the dollar, which had a negative impact on metals by making them more expensive for buyers using foreign currencies.
Visible Chinese copper inventories are decreasing, but Yangshan import premiums have dropped from $50 per tonne in March to just $23 per tonne, suggesting sluggish demand.
On-warrant copper inventories, however, increased by 7,000 tonnes to 57,025 tonnes, their largest level since mid-January. According to WisdomTree analyst Nitesh Shah, as the year progresses, copper demand should increase, driving up prices. “There is more reason to be optimistic than pessimistic,” he declared.
The price of LME aluminium dropped 2% to $2,333 per tonne, a decline from the seven-month high of $2,679.50 reached in January.
Aluminium smelters in China’s Yunnan province, whose production capacity has already been reduced by about 2 million tonnes annually, may need to make more cuts as a result of the drought, according to Citi analysts.
Tuesday pre-market results for Kaiser Aluminium (KALU) and Alcoa (AA) both decreased.
Regarding copper, the decline from 4.1743 is significantly accelerating right now. As long as the 3.3974 resistance holds, a further slide is anticipated to the 3.8229 support and below. Price structures from the peak in January (4.3556) are currently corrective-looking. To finish the correction and bring about a lasting comeback, firm support must therefore appear before the 100% prediction of 4.3556 to 3.8229 from 4.1743 at 3.6416. A prolonged breach of 3.6416, however, could increase the likelihood of further downward momentum toward the 2022 low of 3.1314.
Even when compared to the New Zealand Dollar, the Australian Dollar is generally trading lower today. Given that the major European indices are just slightly declining, risk sentiment isn’t really a component in the selloff. The free fall in the price of copper may instead be a more important issue. But it’s also possible that some traders sold Aussie ahead of tomorrow’s CPI announcement, which will be important for the RBA rate decision on May 2, or next Tuesday.
Bottom Line
Following a weaker-than-anticipated recovery in Chinese demand and swelling stockpiles in the London Metal Exchange warehouse system, copper prices fell to five-week lows on Tuesday.
In LME-registered warehouses, on-warrant copper stocks allegedly increased by 7K metric tonnes to 57K tonnes, the largest level since mid-January.
