Copper prices rose on Monday due to shortages created by tumbling inventories on the London Metal Exchange, but concerns about growth and demand because of the U.S.-China trade dispute capped gains.
Benchmark copper on the LME was up 0.9 percent at $6,217 a tonne at 1056 GMT.
“Copper is very much being driven by availability of metal on exchange and strong physical demand,” said Kash Kamal, an associate at BMO Capital Markets. “Macro headwinds include the trade war between two of the world’s largest economies.”
STOCKS: Inventories of copper in LME approved warehouses at 143,125 tonnes are down more than 60 percent since the 2018 peak near 390,000 tonnes.
The problem is compounded by cancelled warrants — metal earmarked for delivery — at nearly 54 percent of total stocks and a large holding of copper warrants between 50 and 79 percent.
SHORTS: Traders say short position covering ahead of the month end is exacerbating nearby tightness.
This can be seen in the premium for the cash over the three-month contract, which hit $47 a tonne on Friday, its highest since February 2015. It was last at $38 a tonne.
PROFITS: Profit growth at China’s industrial firms slowed for the fifth consecutive month in September as sales of raw materials and manufactured goods further ebbed, pointing to cooling domestic demand.
China’s major stock indexes fell sharply on Monday as earnings reports on industrial and consumer firms sent fresh jitters through the market, raising concerns about the slowdown in economic growth.
CHINA PMIS: Growth in China’s factory sector likely cooled further in October as domestic demand faltered and exporters felt a bigger sting from an intensifying trade war with the United States, a Reuters poll showed.
CHINA DEMAND: China is the world’s largest consumer of copper accounting for nearly half of global demand estimated at around 24 million tonnes this year.
TARIFFS: Chinese tariffs on imports of scrap from the United States has meant strong demand for copper cathode.
China’s unwrought copper imports surged to their highest in 2-1/2 years in September, while copper concentrate imports climbed an all-time high as the crackdown on scrap leaves it needing other forms of the metal.
DOLLAR: A higher U.S. currency, which makes dollar-denominated commodities more expensive for holders of other currencies was weighing on prices of industrial metals as it could subdue demand.
PRICES: Aluminium was flat at $1,998 a tonne, zinc fell 0.5 percent to $2,639 a tonne, lead was down 0.5 percent at $1,988, tin slipped 0.4 percent to $19,215 and nickel ceded 1.1 percent at $11,780.–Reuters