Copper falls as dollar and inventories climb

LONDON — Copper fell on Tuesday under pressure from negative sentiment fueled by a higher dollar and rising inventories, though upbeat industrial production data from China offered some support.

Benchmark copper on the London Metal Exchange (LME) ended down 1.1% at $6,808 a ton.

“A lot of what is going on in base ( metals) is related to the dollar,” said Peter Fertig, analyst at Quantitative Commodity Research.

“China’s economy is in good shape, industrial production is strong and its lending figures are a positive for the construction and housing market.”

DOLLAR: A higher US currency makes dollar-denominated metals more expensive for holders of other currencies, which could dent demand.

INDUSTRY: China’s industrial output rose 7% in April, above forecasts for a 6.3% increase and up from a seven-month low of 6% in March.

LOANS: Chinese banks extended 1.18 trillion yuan ($185.5 billion) in net new yuan loans in April. The forecast was for 1.1 trillion yuan compared with March’s 1.12 trillion yuan.

PROPERTY: “As China dominates demand for most metals, its monthly update on the economy is watched closely, in particular with regard to the metals- intensive infrastructure and property sectors,” Julius Baer analysts said in a note.

TECHNICALS: A sustained break above $6,890, where the 21-day moving average currently sits, could see a move towards $6,970, the 100-day moving average. Support at $6,710-$6,720 comes from the lows seen earlier this month.

INVENTORIES: Stocks of copper in LME-approved warehouses are at 291,350 tons, up nearly 10,000 tons since last Thursday. Copper stocks in warehouses monitored by the Shanghai Futures Exchange are at nearly 280,000 tons, compared with close to 250,000 at the end of April.

POSITIONING: Traders said many funds are still short copper.

“Having registered a net speculative short of 2.7% of open interest on May 8, a level not seen since Sept. 2016, positioning in copper is now a net speculative short of 1.8% of open interest, or 3,300 lots (of 25 tons each),” Marex Spectron said.

PRICES: Aluminum closed 0.40% up at $2,327 a ton, zinc gained 0.20% to $3,062, lead fell 1.6% to $ 2,348, tin was down 0.40% at $20,875 and nickel lost 0.50% to $14,425. —