LME Commentary

 

Benchmark three-month copper in London was down 0.02% at $8,960 a tonne by 1600 GMT. It touched $8,830 in early trade, its lowest since Sept. 21.

 

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. But with the Federal Reserve kicking off its rate hike cycle in March, and with inflationary pressures continuing to rise, investors expected the central bank to further accelerate rate hikes, and the outbreak's concern over the demand outlook sent copper prices back from their highs. Prices closed Monday 17.4 percent below their early March peak.

 

Commodity analyst John Mayer said risk aversion prevailed in the market as central bank policymakers were aggressively raising interest rates to rein in soaring inflation. A worrying slowdown in Chinese demand also weighed on sentiment.

 

On Wednesday (June 15), the Federal Reserve raised its benchmark interest rate by 75 basis points, the largest increase since 1994. The Fed is expected to steadily raise interest rates in 2022.

 

The European Central Bank also signaled a series of interest rate hikes from July last week, the Bank of England raised interest rates by 25 basis points to 1.25% last week, and the Swiss National Bank raised interest rates for the first time in 15 years.

 

The dollar retreated slightly on Monday, but was not far from its recent 20-year high. The dollar is up 9% so far this year. A stronger dollar means that metals quoted in dollars are more expensive for overseas buyers.

 

On Monday, the People's Bank of China kept its benchmark lending rate unchanged, in line with market expectations. As other major central banks around the world raise interest rates, it is difficult for China to lower interest rates to stimulate domestic economic growth, which could lead to a depreciation of the yuan and capital outflows. In addition to wanting to avoid further deviations from the Fed's rate hike path, brokerage Marex said, there is a greater possibility that China is taking a wait-and-see approach as it wants to save ammunition before the economy is widely opened.

 

A drop in LME inventories provided support for copper prices. Copper inventories in LME-registered warehouses stood at 117,025 tonnes, down 35% since mid-May.

 

In Peru, the second-biggest copper producer, the country's central bank predicted that economic growth may decline slightly as major mining projects are disrupted by protests.

 

In Chile, the world's top copper producer, workers at state-owned miner Codelco said Saturday that workers began preparing for a nationwide strike after the company announced the Ventanas smelter.

 

In China, the top metal consumer, Chinese aluminum imports fell 16.4% in May from a year earlier. Refined copper output rose 4.7% year-on-year in May to 910,000 tonnes, data from the National Bureau of Statistics showed on Friday.

 

On Friday, the LME approved rules requiring members to report all over-the-counter (OTC) positions. London nickel futures surged in March this year, which the market believes is partly due to over-the-counter trading.

 

Data show that global primary aluminum production in May was 5.805 million tons, an increase of 0.43% year-on-year.

 

Elsewhere in other metals, aluminium added 1.4% to $2,533 a tonne, nickel added 0.3% to $25,735 a tonne, lead added 1.3% to $2,087.50 a tonne and zinc added 0.1% to $3,528 a tonne , but tin slipped 0.6 percent to $31,000 a tonne. (over)