Copper Prices Decline Amid Strengthening Dollar and China’s Reserve Plans
Copper prices dipped on Friday due to a stronger dollar, despite reports of China planning to increase its strategic reserves of industrial metals. The lack of specifics on the proposed purchases limited market impact. The dollar’s strength, supported by Federal Reserve signals, further increased the cost of dollar-priced metals for foreign buyers.
On Friday, copper prices in London faced downward pressure primarily due to a stronger U.S. dollar, even following a media report regarding China’s intentions to bolster its strategic reserves of essential industrial metals. The National Food and Strategic Reserves Administration, responsible for managing official commodity stockpiles, reportedly made inquiries for these metals without disclosing specifics about the volume or timing, as reported by Bloomberg News.
The metals under consideration for purchase include cobalt, copper, nickel, and lithium. At the London Metals Exchange, benchmark three-month copper (HG1!) decreased by 0.3%, pricing at $9,911 per metric ton as of 0339 GMT. A trader stated that “the strategic buying news doesn’t have much impact on metals prices today, due to lack of details.”
The strengthening of the dollar was supported by the U.S. Federal Reserve’s recent signals indicating no imminent plans to decrease interest rates. Consequently, the dollar index (DXY) surged 0.2%, reaching 103.96 after a 0.36% rise on Thursday. A stronger U.S. currency renders dollar-denominated metals costlier for international buyers.
Additionally, U.S. President Donald Trump invoked emergency powers to enhance domestic production of critical minerals, including lithium and nickel, to counter China’s dominance in the sector and fulfill the expected demand for batteries in electric vehicles. Other metals on the market also saw declines, with aluminum (ALI1!) slipping 0.4% to $2,649.5 per ton, lead (LEAD1!) dropping 0.7% to $2,042, and zinc (ZNC1!) falling 0.3% to $2,911.
In the Shanghai Futures Exchange, SHFE copper (HG1!) decreased by 0.3% to 81,110 yuan ($11,252.64) per ton. SHFE aluminum (ALI1!) also fell by 0.3%; however, zinc (ZNC1!) rose slightly by 0.1% to 23,775 yuan. Lead (LEAD1!) and nickel (NICKEL1!) experienced declines of 1.3% and 0.7%, respectively, while tin (FTIN1!) recorded a gain of 0.6% to 280,710 yuan. The exchange rate is reported as $1 equaling 7.2463 Chinese yuan renminbi.
Copper prices faced significant pressures from a strengthening U.S. dollar, overshadowing potential market impacts from China’s strategic reserves expansion plans. The lack of detailed information on the proposed purchases contributed to the subdued effect on prices. Additionally, ongoing U.S. efforts to enhance mineral production signify a strategic response to global competition in the sector.
Original Source: www.tradingview.com
