Base metals stumble, led by stronger dollar hit on copper

BASE METALS DIVED INTO BEARISH TERRI TORY AT THE CLOSE OF LAST WEEK’S TRADING ACTIVI TIES, and it was led by copper, which was hit by profit-taking and risk-off sentiment, while a firmer dollar weighed more pressure following a stronger-than-expected U.S. inflation data.

This outcome, according to commodity analysts, has raised concerns over a surging inflation and a more aggressive policy tightening by the Federal Reserve in the aftermath of an unexpectedly large jump in U.S. consumer prices in January.

As a result, benchmark copper on the London Metal Exchange (LME) shed 2.9 percent at $9,956 a tonne.

On the Shanghai Futures Exchange (ShFE), the most-traded March copper contract was down 0.7 percent at 71,480 yuan ($11,240.23) a tonne, erasing early gains that had driven it to its highest in nearly four months.

Commenting on copper’s slip, Wenyu Yao, senior commodities strategist at Dutch financial services corporation, ING, said the red metal is “standing” in front of a race between a growing hawkishness from the Federal Reserve and more pro-growth China policies.

Carsten Menke, commodity analyst at Swiss-based banking corporation, Julius Baer, said the risk-off sentiment in financial markets and the dollar’s rise impacted on copper prices.

“In terms of the bigger picture, there’s a general cooling of the economy in China. Infrastructure and property are both key in terms of driving metals demand and we do not expect a quick reversal in either,” he added.

Menke forecasts LME copper to ease lower to $9,500 a tonne in three months and to $8,750 in 12 months.

For other base metals, LME zinc lost 1.1 percent at $3,664 a tonne; nickel was down 1.1 percent at $23,270 a tonne; lead lost 0.8 percent at $2,261 a tonne; tin dropped 1 percent at $43,750 a tonne; while aluminium lost 1.6 percent at $3,198.50 a tonne.

On the Shanghai Futures Exchange, zinc was flat at 25,550 yuan a tonne; aluminium sank 2.5 percent 22,670 yuan a tonne; nickel slumped 0.4 percent to 172,070 yuan a tonne; lead gained 0.6 percent to 15,230 yuan a tonne; while tin edged 0.1 percent higher to 335,120 yuan a tonne.

Despite the losses recorded in base metal prices, market dealers observed that the metals advanced on a weekly basis, led by aluminium, which scaled to $3,333 a tonne, its highest level in more than 13 years a day prior, amid worries about smelter shutdowns in China and Europe and low inventories at exchange warehouses.