MARKET COMMENTARY
London copper started the year on a positive note after U.S. President Donald Trump set a date for signing a Phase 1 trade deal with China, top producer Chile's output fell and Beijing cut banks' reserve requirements. China's central bank (PBOC) cut the amount of cash that banks must hold as reserves, releasing about 800 billion Yuan ($114.91 billion) in funds to shore up its slowing economy. Copper prices improved further on optimism that the world's top metals consumer would also sign a phase 1 trade deal with the United States on 15th of January. London copper steadied second week of Jan., lifted by low inventories and tight supplies amid concerns about any impact from Iran's strike on U.S. forces, while a weaker dollar also supported prices. London copper continued to moved higher as most industrial metals rallied on signs that Iran and the United States were keen to de-escalate the Middle East standoff.
Washington and Beijing signed a Phase 1 trade deal on 15th January that will roll back some tariffs and boost Chinese purchases of U.S. products, defusing an 18-month row that has hurt global economic growth and metals demand. After the deal copper edged up to $6343 on 16th of Jan. But investors are worried that the pact would not substantially boost metals demand as the deal left a number of sore spots unresolved, while demand has not improved significantly to support prices. Industrial metals started to fell on 17th of Jan, pulled lower as negative sentiment spilled over from stock markets.
After person-to-person transmission of a new virus was confirmed in China oh 21st of January, and following a rating downgrade for Hong Kong. The new virus causes a type of pneumonia and belongs to the same family of coronaviruses as SARS. The deaths from the new flu-like coronavirus, started in Wuhan city in China. London copper, falling for a 12th straight session, as a jump in inventories and the spread of a flu-like virus in top metals consumer China weighed on prices. China was locked down some cities to constrain the virus, feared to spread even faster as millions of Chinese travel during their Lunar New Year holiday (started to 24th of Jan). The Chinese government, as a result, said it would extend the week-long Lunar New Year holiday by three days to Feb. 2 in a bid to slow the virus spreading. China is the world's biggest copper consumer and a major user of many other metals. Fears that the epidemic would stall economic activities have dented metals demand.
London copper recorded for their biggest monthly decline in eight months as the coronavirus epidemic raised fears of a slowdown in demand from top metals consumer China. Three-month copper on the London Metal Exchange (LME) has fallen 9.8% so far in the month, for its sharpest drop since May 2019.