BY Onome Amuge
Copper and other industrial metals rebounded into bullish territory as investors increased trading activities following positive news about the Chinese government’s intensified efforts to avert a potential crisis in the country’s real estate market which consumes a large amount of metal in the world’s largest metal consuming country. A weaker dollar also lent support to the valuation of the base metal.
As a result, three-month copper on the London Metal Exchange (LME) climbed 2.2 percent to trade at $7,350 a tonne in official open-outcry trading, after tumbling to $6,955 in the previous session, its lowest since November 2020.
Prior to its current level, LME copper had dropped 32 percent since touching a record peak of $10,845 a tonne in early March, as investors slowed trade activities over concerns of a slowdown in China and aggressive interest rate hikes that could spark a global recession.
Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, has however cautioned that industrial metals face the risk of further weakness despite recent recovery.
“This is still a bear market bounce, and it’s too early to predict whether this will turn into consolidation and a recovery,” Hansen said.
He observed that the market was increasingly oversold, with short-sellers looking for an excuse to cover shorts which they found with the China economic support story and the weaker dollar.
According to news reports, Chinese regulators intensified efforts to encourage lenders to extend loans to qualified real estate projects as the troubled property sector faced fresh risks from a widening mortgage-payment boycott on unfinished houses.
Copper prices were further strengthened on information that CMOC Tenke Fungurume copper and cobalt mine has suspended all exports, complying with demands by a court-appointed administrator.
Also supporting metals prices was a decline in the dollar index, which, according to market analysts, makes commodities priced in the US currency cheaper for buyers using other currencies.
LME aluminium was up 2 percent to $2,390 a tonne, nickel advanced 3.2 percent to $20,000 a tonne, and lead climbed 1.2 percent to $1,968 a tonne.
Meanwhile, zinc traded 2.5 percent higher to $2,987 a tonne, underpinned by a tight supply, as LME data showed that zinc inventories fell to a fresh low since April 2020, having tumbled by 64 percent over the past seven months.
On the flipside, tin was the only industrial metal on the bearish side of the market as the soft metal lost 2.6 percent to trade at $24,200 a tonne.