LONDON — Copper on Friday was on track for its biggest weekly fall since March 2020 after the U.S. Federal Reserve signaled that it would begin to tighten monetary policy and China said it would sell state reserves to limit prices.
The shift in tone from the Fed also pushed the U.S. dollar towards its largest weekly gain since September, making metals more expensive for buyers with other currencies.
Benchmark copper on the London Metal Exchange (LME) was down 0.8% at $9,238 a tonne at 1033 GMT and down around 7.5% this week.
The sell-off follows a remarkable rally, with the metal used in power and construction reaching a record high of $10,747.50 in May.
“We probably have seen the peak for this year,” said ING analyst Wenyu Yao, adding that rising demand from infrastructure building and electrification would likely keep prices around current levels in the coming years.
FED: Fed officials, increasingly confident the U.S. economy is recovering fast from the pandemic-induced recession, have begun telegraphing an exit from the central bank’s extraordinarily easy monetary policy.
CHINA: Analysts at Macquarie said they expected China’s state metal sales to be relatively small – around 300,000-500,000 tonnes for aluminum – and to decrease as prices come down.
OUTLOOK: Macquarie also said it expected a deficit of copper this year, small surpluses over 2022-24 and structural undersupply from 2025. They said prices would average around $8,000-$9,000 over the next four years.
TECHNICALS: Copper was hovering around its 100-day moving average at $9,242. A move below that level could trigger more selling.
STOCKS: Copper inventories in LME-registered warehouses continued to increase, rising by 24,925 tonnes to 168,675 tonnes, the highest since April.
Stockpiles in warehouses registered with the Shanghai Futures Exchange fell by 8,440 tonnes to 172,527 tonnes in the week to Friday.
CHINA TRADE: China’s aluminum imports declined in May and its copper exports rose, customs data showed.
OTHER METALS: LME aluminum was down 0.4% at $2,390 a tonne, zinc fell 1% to $2,882.50, nickel rose 0.9% to $17,320, lead rose 0.4% to $2,138 and tin was down 1.3% at $30,200. (Reporting by Peter Hobson; Additional reporting by Mai Nguyen; Editing by Jan Harvey)