Metals-dollar Surge Drives Down Copper Prices

LONDON, Nov 17 (Reuters) – Copper prices fell for a third day on Wednesday as expectations of U.S. interest rate rises lifted the dollar to 16-month highs, making metals priced in the greenback costlier for buyers with other currencies.

Benchmark copper on the London Metal Exchange (LME) was down 1.6% at $9,404 a tonne at 1723 GMT.

Prices of the metal, used in construction and to conduct electricity, hit a record high of $10,747.50 in May but have since lost momentum as economic growth has slowed.

The dollar was steady on Wednesday but has surged in the last week as strong U.S. economic data and high inflation lead many investors to expect a U.S. rate hike as early as mid-2022.

That has dragged copper to its 200-day moving average, a key technical indicator currently at $9,408 a tonne, said Saxo Bank strategist Ole Hansen.

“If we close below that level, we could see the market reverse down to $9,000,” he said, but added that prices were unlikely to fall far because demand will rise as the world builds infrastructure for electrification.

DEMAND: The world will need to double its copper supply and quadruple its nickel supply in the next 30 years to facilitate a decarbonised world, an executive at miner BHP said.

SPREAD: A supply squeeze on the LME that pushed prices up last month has faded, with copper moving into exchange warehouses and the premium for cash copper over the three-month contract falling to $14.90 a tonne from over $1,100 last month. CMCU0-3MCUSTX-TOTAL

COLUMN: All eyes are on China as copper spreads on the LME collapse, writes Reuters columnist Andy Home.

CHINA COAL: Chinese coal prices continued to plummet as Chinese mines ramp up production. Cheaper coal should reduce energy costs for metal smelters.

ALUMINIUM: Electricity costs are most important for aluminium, the production of which uses huge amounts of power. Shanghai aluminium prices fell sharply. On the LME, aluminium was up 1.7% at $2,619 a tonne but still nearly 20% down from its peak last month.

CHINA OUTPUT: In October, China’s copper output fell 0.3% year-on-year, zinc output fell 9.2% and alumina production fell to a 10-month low, official data shows.

METALS PRICES: LME zinc fell 0.9% to $3,194.50 a tonne, nickel slipped 0.2% to $19,360, lead lost 1.9% to $2,263, while tin was up 1.1% at $38,045.

Reporting by Peter Hobson Additional reporting by Mai Nguyen in Hanoi’; Editing by Kirsten Donovan/Krishna Chandra Eluri/Pravin Char

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