Copper price falls due to falling manufacturing that points to weak demand

Copper prices slipped on Wednesday as growing expectations that China will ease COVID-19 controls next year were offset by gloomy near-term prospects for manufacturing and demand for metals.

The market was also bracing for a big US interest rate hike later that will stifle economic activity, although many investors expect the Federal Reserve to suggest a slower pace of future hikes.

Benchmark copper on the London Metal Exchange (LME) was down 0.1% at $7,645 a tonne as of 11:16 GMT, after rising 2.7% on Tuesday.

The trigger for Tuesday’s gains was an unverified note circulating on social media that Chinese Politburo permanent member Wang Huning had formed a “Reopening Committee” that aimed to ease COVID rules by March 2023.

Hopes of this reopening sent Chinese stock markets higher for the second day in a row, while the yuan maintained its gains against the dollar, making dollar-priced metals cheaper for local buyers.

However, the COVID restrictions currently in place are disrupting Chinese industry and this week’s data showed a drop in factory activity around the world.

Copper prices have fallen 30% from the peak reached in March.

“We are increasingly bearish on the base metals complex in general and recommend selling the rallies”, Citi analysts said.

Economic data from the United States and Europe are likely to worsen and Chinese growth could disappoint, they said. “We see metal buying plummeting over the next six months, weighing on prices”.

LME aluminum was up 0.3% at $2,250 a tonne, zinc was down 0.2% at $2,738.50, nickel was up 1.3% at $23,910, lead was down 0.4% at $1,973 and tin was lower. appreciated 1.3% to US$18,205.

With information from Reuters.