Copper dips as weak China growth highlights demand challenge
Copper prices fell on Tuesday as a sharp slowdown of economic growth in top metal consumer China reminded traders of the reality of weak physical demand and a global economic downtrend.
Three-month copper on the London Metal Exchange fell 0.4% to $9,072 a tonne by 0558 GMT, on track for a third straight session of loss.
China’s economy slowed sharply in the fourth quarter due to stringent COVID curbs, dragging down 2022 growth to one of its worst in nearly half a century and raising pressure on policymakers to unveil more stimulus this year.
China’s factory output grew 1.3% in December from a year earlier, slowing from a 2.2% rise in November, while retail sales, a key gauge of consumption, shrank 1.8% last month, extending November’s 5.9% drop.
Both indicators beat expectations but were still weak.
LME copper is set for a third straight month of gain and has risen some 22% since end-October 2022, buoyed by a weaker dollar and as investors bet on a recovery in the Chinese economy following the easing of COVID-19 restrictions there.
“The mutual view from the market is that the Chinese market is going to increase very sharply after COVID but it only depends on when it can start,” said CRU analyst He Tianyu.
But physical demand recovery for copper is not expected until late February or early March at the earliest, after the Chinese New Year holiday break and an expected second wave of COVID-19 infections in China, CRU’s He said.
The most-traded March copper contract on the Shanghai Futures Exchange was almost unchanged at 68,610 yuan ($10,142.36) a tonne.
LME aluminum fell 0.9% to $2,598 a tonne, zinc shed 0.6% to $3,284 a tonne, tin was down 1.3% to $28,100 a tonne, while lead rose 0.2% to $2,222 a tonne.
SHFE nickel decreased 0.3% to 203,490 yuan a tonne, zinc declined 0.2% to 24,150 yuan a tonne, tin was down 1.1% at 224,170 yuan a tonne, while aluminum rose 0.6% to 18,610 yuan a tonne and lead climbed 0.1% to 15,330 yuan a tonne.
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($1 = 6.7647 yuan) (Reporting by Mai Nguyen in Hanoi; Editing by Nivedita Bhattacharjee and Subhranshu Sahu)
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