Copper prices held steady in London on Wednesday despite pressure from concerns about current demand in top metals consumer China, rising stocks, and a stronger dollar.
Benchmark copper on the London Metal Exchange (LME) was stable at $9,567 a metric ton in official open-outcry trading. It has dropped 14% since speculative buying took prices to a record high of $11,104.5 on May 20.
Dan Smith, head of research at Amalgamated Metal Trading, noted that copper rod or wire rod producers in China have increased production a little bit in June from April-May levels, but this growth has not been significant, indicating that demand has not picked up much yet despite the price drop.
Copper stockpiles in the LME-registered warehouses kept on rising, with the daily LME data showing 2,700 tons of arrivals which boosted the stocks to 175,475 tonnes, the strongest in more than six months. The discount for LME cash copper over the three-month contract also hit a record high of $148.4.
A stronger U.S. dollar kept pressure on dollar-priced metals by making them more expensive for buyers using other currencies. China’s yuan weakened to a fresh seven-month low against the dollar.
However, tight copper mine supply may provide an upside to the metal, used in power and construction, in the second half of the year, according to BofA Securities. The bank noted that the base metals rally that started in January has been fading, repeating a pattern seen in the past two years, but the fundamental backdrop is much stronger this year, so the downside is ultimately limited.