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London copper slipped on Tuesday from a seven-week peak hit in the previous session as expectations of rising US interest rates pushed up the dollar and flattened commodity prices.
The US dollar hovered close to an 11-year high against a basket of currencies, supported by growing expectations the Federal Reserve will hike rates in June, eroding the allure of commodities by making them more expensive for holders of other currencies.
PBOC rate cut
Copper struck seven week highs on Monday after the People’s Bank of China cut interest rates at the week-end to shore up the economy which is struggling with a moribund property market and slowing economic growth.
Markets are now waiting to gauge the strength of China’s industrial demand, after Lunar New Year holidays finished last week, and looking to fresh insights on economic policy from an annual leadership meet that begins on Thursday.
“Chinese new year has finished now, so we really should be in a buying season... it’s worrying me that we’re not seeing follow through,’’ said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.
“Plus, global rhetoric at the moment is teetering towards a soft patch, and that’s really inhibiting copper from having a good move to the upside. Structurally I’m positive — I think long is the correct way to be.’’
LME copper
Three-month copper on the London Metal Exchange had slipped 0.8 per cent to $5,862 a tonne by 0137 GMT, after ending little changed in the previous session when it struck its highest since January 13 at $5,960.
The most-traded May copper contract on the Shanghai Futures Exchange slipped 0.6 percent to 42,600 yuan ($6,789) a tonne.
Bonded premiums continued to climb slowly, reflecting a sluggish pick-up in demand, rising by $2.50 to $90-100 on Friday. A trader said she saw premiums rising to $100-105 near term where they should settle, given moderate demand.
China's slowing economy
China’s slowing economy will be at the forefront as parliament convenes for its annual meeting this week, with the week-end interest rate cut a reminder of the challenge of balancing painful restructuring with combating the onset of deflation.
Elsewhere, growth in the US manufacturing sector jumped during February, with factories reporting their best gains since October, according to an industry report released on Monday.
In news that could further tighten the copper concentrate market, and underpin copper prices, Newmont Mining Corp’s Indonesian copper export permit will not be renewed beyond March 19 unless it strikes a deal with Freeport-McMoRan Inc to invest in the latter’s planned smelter, a government official said.
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