Copper prices continued to decline on Monday, reaching a seven-week low as the dollar strengthened amid concerns about future U.S. trade policy under President-elect Donald Trump, and demand from China, the top consumer, remained weak.
Market Movement:
The most-traded three-month copper contract on the London Metal Exchange (LME) fell by 1.5% to $9,301 per metric ton, dipping to $9,300.5 earlier, the lowest level since September 18.
The dollar index rose by 0.5% to its highest level since early July, making dollar-denominated metals more expensive for foreign currency holders.
Impact of U.S. Trade Policy:
The dollar’s rally is fueled by expectations that Trump’s proposed tariff and tax policies could maintain high U.S. interest rates, adversely affecting trading partners like China, which is struggling to stimulate its economy.
Despite efforts to tackle hidden debt and boost stimulus measures, these initiatives have not translated into improved market sentiment.
Weak Chinese Credit Data:
Sluggish corporate borrowing in China has emerged as a bearish indicator for metals consumption. Chinese banks extended only 500 billion yuan ($69.51 billion) in new loans last month, falling short of the 700 billion yuan forecast.
Total social financing, a critical measure of demand for metals, also slowed to a record low of 7.8%.
Upcoming Economic Indicators:
House price data, set to be released on Friday, will provide further insights into the strength of the Chinese economy.
Physical Demand Indicators:
Top copper miner Codelco has offered its 2025 copper output to Chinese clients at a premium of $89 per metric ton, indicating demand trends. The spot premium for copper delivery to Shanghai stands at $45, according to SMM.
Other Metals Performance:
Aluminium prices fell by 1.5% to $2,582 per metric ton after soaring to five-month highs last week due to supply disruptions of bauxite and alumina.
Other metals saw mixed performance: zinc dropped 0.1% to $2,975.5, nickel decreased by 1.8% to $16,110, lead remained flat at $2,025, and tin dipped 1.4% to $31,220.