LME Commentary

 

Benchmark three-month copper in London was down 1.3 percent at $9,328 a tonne by 1604 GMT.

 

Copper hit an all-time high of $10,845 in early March as investors focused on a green transition and electrification would drive strong demand growth, while conflict in Russia and Western sanctions could disrupt Russia’s metal supply. However, as the Fed started the rate hike cycle in March, and as inflationary pressures continued to rise, investors expected the central bank to further accelerate the pace of interest rate hikes, coupled with concerns about the demand outlook due to the epidemic, copper prices fell from highs, and on May 13 It fell to a fresh seven-month low of $8,938 on Monday. Prices still closed Monday 14 percent below their early March peak.

 

Analysts at research firm CRU Group said the copper market faces multiple bearish threats, including the possibility of a decline in economic or industrial production triggered by geopolitical risks, the impact of high inflation reaching deeper into all levels of the economy, or the outbreak lasting longer than expected.

 

ED&F Mann financial markets analyst Edward Meyer said the situation was looking rather depressing. Rising inflation, ongoing conflict in Ukraine, high energy prices and headwinds to economic growth.

 

Part of the reason for the surge in global inflation is rising energy costs, which means consumers are likely to buy less white goods, denting demand for industrial metals. Crude oil futures have risen more than 60% since January.

 

Raising interest rates by central banks to control inflation also means that economic growth and consumer demand could be hurt.

 

The Fed is expected to raise rates at its policy meeting this week, with some forecasting a 75 basis point hike.

 

The U.S. dollar index rose sharply on Monday as strong U.S. inflation data pushed Treasury yields higher. A strong dollar means dollar-denominated metals are more expensive for buyers of other currencies, dampening demand and prices.

 

Data released by the U.S. Department of Labor last week showed that the U.S. consumer price index (CPI) increased by 8.6% year-on-year in May, up from 8.4% in April, which means that the Federal Reserve is likely to raise interest rates by 50 basis points in a row before September. to fight inflation. In fact, traders were already pricing in a 75 basis point rate hike from the Fed on Monday.

 

Last week the European Central Bank said it would raise interest rates for the first time since 2011 in July, with a bigger move likely to follow in September.

 

Chile's deputy mining minister said Friday that the government takes into account the cost differences faced by different copper miners when planning industry-wide royalties

 

The Shanghai Futures Exchange said on Friday that copper inventories in the exchange's registered warehouses rose 18.7 percent from a week earlier.

 

On Monday, LME aluminium fell 1.6% to $2,638 a tonne, having earlier touched $2,595, its lowest level since Dec. 15.

 

Aluminium inventories in LME-registered warehouses stood at a 21-year low of 423,975 tonnes, compared with nearly 2 million tonnes in March 2021. Aluminium inventories in Shanghai Futures Exchange-registered warehouses stood at 269,583 tonnes, down more than 20 percent since mid-March.

 

Investigations into fraudulent financing using aluminum stockpiles have been expanded to three Shanghai companies suspected of repeatedly pledging aluminum stockpiles, the Securities Times reported.

 

In other metals, zinc was down 2% at $3,620 a tonne, lead was down 2.2% at $2,101 a tonne, tin was down 7.1% at $32,765 a tonne and nickel was down 5.2% at $25,850 a tonne /Ton. (over)