MARKET COMMENTARY
London copper prices hit their highest in more than two years on the first day of September after data showed top consumer China saw a strong expansion in manufacturing activity in August.
Three-month copper on the London Metal Exchange jumped to $6,830 a tonne. But copper eased on the second day of September from a 26-month high hit in the previous session, as the U.S. dollar firmed and comments by a Peruvian government official eased concerns over supply from world's No. 2 producer. Making greenback-traded metals more expensive to buyers using other currencies, the dollar bounced off two-year lows on solid U.S. manufacturing data. Copper fell to $6,547 a tonne after the dollar strengthened on 3d oh September. Copper is often used as a gauge of global economic health.
Datas of first week showed solid growth in China's manufacturing and services sectors, boosting hopes that the world's second biggest economy is recovering from the COVID-19 pandemic. Copper prices gained on 4th September as low inventories in exchange warehouses, disrupted ore supplies and solid economic recovery in top consumer China lent support.
LME copper fluctuated in the band $6609-$6830 between September 07-17. Notwithstanding headwinds arising from the intensifying rift between Washington and Beijing, economic stimulus measures across the world continue to support prices of copper,seen as a gauge of global economic health.The metal has gained more than 40% since March and is the best performing base metal this year so far.
"Copper looks well supported by both demand and supply," said commodity strategists at ANZ in a note. "Ample stimulus is paving the way for strong consumption, while mining disruptions are keeping supply tight." Analysts at CRU estimate Chinese demand dropped 15% in the first quarter due to COVID-19. "But there has been a strong recovery in the second quarter. We expect Chinese refined copper demand will grow 1-2% this year." "Copper should remain supported in the mid $6,000s. Much of the risk in the short term comes from non-copper specific factors, namely the dollar, further fund inflows, government stimulus measures or the progression of Covid-19."
London copper fell by the most in seven sessions on 17th September to $6,676 as the dollar climbed after the U.S. Federal Reserve said it expected the post-coronavirus recovery to gain steam in the world's largest economy. London copper hit a more than two-year high on 18th September, buoyed by a weaker dollar and strong fund buying on hopes that Chinese stimulus would spur demand in the world's biggest metals consumer. London copper gained more ground on 21th September, climbing to its highest in more than two years ($6878), as a recovery in China's industrial production underpinned prices.
The global economy appears to be recovering from the coronavirus slump faster than thought only a few months ago, thanks to improving outlooks for China and the United States, the OECD said.
Physical copper premiums in China continued to fall, losing $4.50 to $59 a tonne, data showed, extending a decline from highs of $100 six weeks ago. That was the lowest level since the start of April.
LME copper stocks available for purchase dropped by 25% on 21st September. Total LME stocks remain at levels not seen since 2005. Despite that, official prices closed lower in the last session, thanks to markets reducing risk as global coronavirus cases rise. But copper prices declined on 21th September after tested $6,878 as a strengthening U.S. dollar made greenback-priced commodities more expensive for holders of other currencies. The three-month copper on the London Metal Exchange fell to $6449 a tonne on 24th Sept. "It's the strong U.S. dollar (behind copper's price fall).
London copper edged up the last days of September as solid manufacturing and services data from top consumer China boosted optimism, but a stronger U.S. dollar capped gains. Three-month copper on the London Metal Exchange closed to September on $6,686.