Tuesday, March 9, 2021

Copper Slides Below $4 amid China Cooling Economic, Credit Growth Forecasts

Copper futures fell below $4 as investors concentrated on China. Despite the world’s second-largest economy importing more of the industrial metal in January and February, Beijing dampened investor expectations by officials cooling the country’s growth and credit plans. The red metal is facing a global supply deficit, but Chinese demand ostensibly accounted for most of copper’s red-hot surge.

April copper futures declined $0.097, or 2.21%, to $3.996 per pound at 14:10 GMT on Tuesday on the New York Mercantile Exchange. Copper prices have been on a tear this year, climbing 14% in 2021.

According to the General Administration of Customs, China’s imports of unwrought copper and copper materials advanced 4.7% in the first two months of 2021. In total, Beijing, which is the world’s largest copper consumer, purchased 3.79 million tons of copper concentrate.

A new report from the China Nonferrous Metals Industry Association (CNMIA) suggests that nation’s record buying-spree could force the country to pay an extra $20 billion for its imports this year.

Overall, the nation’s imports soared 22.2% year-over-year, representing the fifth consecutive month of growth in inbound shipments.

But China’s copper demand could subside in the coming months after the government reduced its economic growth and credit projections. The biggest metals consumer will begin to wind down its monumental coronavirus stimulus and credit growth to decrease its debt risks.

Fitch Ratings said in a research note:

In line with the goal of supporting growth, the government’s planned fiscal consolidation in 2021 will be more modest than we had previously anticipated.

This has market observers projecting that copper could decline to close out the first quarter due to a paucity of bullish signals. This has been seen in how institutional investors are trading copper. The London Metal Exchange (LME) net speculative long positions in copper have declined 46%, down from the 18-year high of 62%.

This comes after a new industry report forecast that global copper production could recover by 5.6% in 2021 after two straight years of flat growth.

A strengthening greenback has also weighed on copper prices, with the US Dollar Index (DXY) rallying 2% over the last month. The index, which gauges the buck against a basket of currencies, tumbled 0.35% to 91.99 on Tuesday. A stronger greenback is bad for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase.

In other metal markets, April gold futures soared $38.60, or 2.3%, to $1,717.50 per ounce. May silver futures spiked $0.816, or 3.23%, to $26.07 an ounce. April platinum futures advanced $21.50, or 1.87%, to $1,173.80 an ounce. April palladium futures fell $24.20, or 1.05%, to $2,290.00 per ounce.

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Published under: Copper

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