Copper Reached a New Multiyear Low Due to Demand Concerns

LME nickel tumbled to close at $US8,735 a tonne, down 2.4 per cent and its weakest since July 2003. “Copper is moving towards its target area of $4,400 which, if broken, would signal a move down to $3,800”, a trader said earlier this morning.

Zinc, copper and nickel has rebounded as bearish investors buy back positions to lock in profits while a weaker United States dollar and firmer oil also support the hard-hit market.

In Tangshan in China’s top steel producing Hebei province, utilisation rate stood at 81 percent, a six-year low, said Lau.

The fall in zinc prices came despite major Chinese zinc smelters saying they will slash output by 500,000 tonnes next year, nearly a fifth of their output.

On November 23, copper reached new six and half year low price level due to the strong dollar and consistent demand concerns.

On the London Metal Exchange, three-month copper hit a low $4,461.50 a tonne before recovering slightly to $4,469 by 0420 GMT, off 2.4 percent from the previous session.

LME zinc, which has shed 27 per cent this year, touched a six-year low of $US1487.50 last week, weighed down by worries about softer Chinese demand and excess supplies. Copper, aluminum and zinc are at levels not seen since 2009, while Bloomberg’s gauge of mining shares is near the lowest in seven years.

Analysts were wary that the rebound may not last long.

The above graph is line chart of LME metal index from Jan 2015 till date.

The dollar may resume its upward path, weighing again on the metals complex.

The FED interest hikes which are being priced in for both this year and the next, is also likely to keep the dollar stronger and pressure on these prices, as it makes these commodities more expensive for non-dollar denominated purchases.

Shanghai Futures Exchange copper ended 0.56 percent down at 33,850 yuan ($5,298.42) a tonne on Tuesday. Gross domestic product rose at a 2.1 per cent annualised rate, up from an initial estimate of 1.5 per cent. “US GDP may be giving a boost to the demand-side component of commodities in general”.