Copper edges lower as banking troubles threaten demand

LONDON: Copper prices fell on Monday as investors worried that turmoil in the banking sector would restrict economic growth and metals demand.

Benchmark copper on the London Metal Exchange (LME) was down 0.5% at $8,874 a tonne by 1040 GMT.

Prices of the metal used in electrical wiring have drifted from a seven-month high of $9,550.50 in January but remain well above last year’s low of $6,955, with many analysts expecting a rally above $10,000 this year.

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Demand in China, the biggest consumer, is rising, but bank failures have raised the threat of a credit crunch.

“Our base-case forecast for base metals this year embeds a tension between a mild U.S. recession developing later this year and a stronger 2023 economic growth environment in China,” JPMorgan analysts said.

“Hence, while we see base metals prices grinding lower in the coming quarter, we are not calling for an outsized rebasing lower and still forecast a more sustained recovery developing in 2024.”

Citi analysts said that Chinese investment in infrastructure and manufacturing was strong but investment in property, a key source of metals demand, was weak.

“We continue to recommend waiting for opportunities to establish long-term copper exposure at less than $8,500 a tonne,” they wrote.

Speculators in copper futures on the COMEX exchange remain bearish.

Copper inventories in Shanghai Futures Exchange warehouses have slumped to 161,152 tonnes from 252,455 tonnes in late February as demand has recovered.

However, Chinese Yangshan copper import premiums have slipped to $39 a tonne from $50 in mid-March.

Meanwhile, a slump in Chinese industrial companies’ profits deepened in the first two months of this year.

In other metals, LME aluminium was little changed at $2,338 a tonne, zinc fell 0.1% to $2,889 and lead slipped 0.5% to $2,114.50.

Nickel was up 0.2% at $23,520 as LME trading during Asian hours resumed after a year’s hiatus.

Tin rose 2.4% to $25,425 a tonne as the cash contract flipped to a premium against three-month metal in a sign of tight supply.