Stronger dollar impacts copper prices

Copper prices fell on Tuesday as the impact of a strengthening dollar overwhelmed positive trade data from China, the world’s largest consumer and producer of industrial metals.

Chinese imports and exports grew more strongly than expected in April and copper imports rose 2.8 percent from the previous month, implying healthy demand and pushing prices higher in early trading.

But demand was dampened by the dollar, which reached a new 2018 high against a basket of major currencies, making dollar-denominated industrial metals more expensive for users of other currencies.

Robin Bhar, head of metals research at Societe Generale affirmed: “the strong dollar has taken its toll.”
Benchmark three-month copper on the London Metal Exchange was down 0.9 percent at $6,768 a tonne, falling below its technically important 200-day moving average.

Copper has been locked between around $6,600 and $7,300 since late last year after recovering from a 2016 low of $4,318.

Headline copper inventories in LME-registered warehouses fell 8,750 tonnes to 302,625 tonnes, the least in three months but far above a low of 183,525 tonnes in December.

Higher Chinese copper imports may not imply greater demand, said analysts at Commerzbank. “The question is whether this is thanks to a dynamic economy or simply arbitrage, that is, stocks being shifted between warehouses,” they said.

A flurry of data incoming the weeks is expected to show China’s economy remained strong in April, underpinned by a pick-up in industrial output and a rebound in exports.

China’s top economic official will visit Washington next week to resume trade talks, the White House said on Monday, after discussions in Beijing last week failed to produce the agreement.

Chilean copper producer Antofagasta said it would take up to three months for stocks to return to normal after a pipeline blockage between the Los Pelambres processing plant and port. Full year production guidance was unchanged.

Aluminium exports from top producer China inched higher in April, as new U.S. import tariffs were offset by U.S. sanctions on Russia’s Rusal which pushed up international prices, making export more lucrative.
Lon Metal Exchange aluminium was up 0.3 percent at $2,356 a tonne after surging to seven-year highs last month.
The premium for cash aluminium over the three-month contract has risen to $20 from close to zero a week ago, suggesting tighter nearby supply.