Copper prices dipped from the previous session’s 7-month high on Wednesday as data showing record Chinese production of the metal helped persuade investors to pause for breath after a rapid rally.
Benchmark copper on the London Metal Exchange (LME) traded down 0.6% at $6,161 a tonne in official rings after touching $6,223 on Tuesday, the highest since May 8.
Copper, used in power and construction, had risen around 6% this month as a “phase one” U.S.-China trade deal and some better-than-expected data led to a less pessimistic reading of the global economic outlook.
Behind that rally were investors abandoning bets that prices will fall, said Macquarie analyst Marcus Garvey.
But now that investor positioning had become more neutral, it was unclear which way copper could move, with the outlook for both trade negotiations and China’s economy remaining uncertain, he said.
Macquarie forecasts copper will average $5,825 a tonne next year.
CHINA: As part of state efforts to stimulate growth in the world’s biggest consumer of metals, China’s central bank lowered the interest rate on 14-day reverse repurchase agreements in step with a similar cut in the 7-day repo rate last month.
CHINA OUTPUT: China’s refined copper output rose by 19.6% year-on-year to a record monthly high of 909,000 tonnes in November, official data showed.
PREMIUMS: Chinese Yangshan copper import premiums fell to $61 from $85 in September, pointing to softer demand for metal from overseas.
COPPER SPREAD: The discount for cash copper versus three month metal on the LME expanded to $34, the most since October, pointing to a better supplied nearby market.
POSITIONING: Speculators’ next long position in LME copper had risen to 6.7% of active contracts by close of trading on Friday, brokers Marex Spectron said.
LEAD: Chinese lead production hit a record high of 572,000 tonnes in November, up 15.1% year-on-year, sparking concern over oversupply.
LME lead traded 0.1% higher at $1,890 a tonne but remained close to a 5-month low of $1,865.50 reached on Dec. 9. The most traded contract on the Shanghai Futures Exchange touched its lowest since April 2018.
The International Lead and Zinc Study Group (ILZSG) predicts a small surplus for the lead market next year.
NICKEL: The global nickel market deficit declined to 52,200 tonnes in the first ten months of the year from 134,200 tonnes in the same period of 2018, the International Nickel Study Group (INSG) said on Tuesday.
OTHER METALS: LME nickel traded down 0.4% at $13,900 a tonne, aluminium traded up 0.7% at $1,776, zinc did not trade but was bid up 1.1% at $2,306 while tin was bid 1% lower at $17,150.