Copper holds near five months low as weak demand outlook dominates

Copper prices remained around five month lows due to a weak demand outlook dominating the market. The reasons for this poor demand perspective is the weak performance of the manufacturing sector around the globe. The negative outlook and poor performance of manufacturing activity across the world have outweighed the usual positive effect of the weaker dollar on copper prices. Usually, a weaker dollar supports higher prices of copper because it makes it cheaper for consumers using other currencies than dollars to buy dollar-priced copper.

On the London Metal Exchange (LME), the benchmark for copper increased by 0.1 percent only to $8,775 metric ton by 11:07 GMT on 2nd January, 2025. On 31st December 2024, it touched its lowest of $8,757 since 8th August.

Despite the weak US dollar making dollar-priced metals cheaper for purchasing through the use of other currencies, traders anticipate that the dollar will appreciate again in the upcoming days. This will make dollar-priced metals more expensive for consumers using other currencies because consumers have to spend more of their own currencies. Thus, the strengthening of the dollar will result in an increase in the metal price that has been due since the end of September.

Industrial metals are also anticipated to come under the pressure occurring due to uncertainty in macroeconomic factors. This is due to the prospect that US President-elected Donald Trump might impose tariffs on imports, which could likely lead to the initiation of a trade war and adversely impact global economic growth and demand.

As per the statement of one of the copper traders, there is a lot of nervousness regarding what steps or the potential action the US President Donald Trump will take when he takes his official position as President. This uncertainty has led to not much growth in manufacturing activity and demand.

Surveys of Purchasing Managers
According to the surveys of Purchasing Managers, the slowdown in the manufacturing sector and its operation was observed in China and South Korea in the month of December. The rate of declining manufacturing activity of European factories is at a faster rate than in the month of November.

Other Metal Commodities
Aluminum prices reached an intra-day high of $2,574.50 a ton. This peak is due to growing worries about supply issues in the London Metal Exchange (LME) market. In the official trading session, it gained 0.3 percent, which accounts for $2,599. The concerns regarding supply issues resulted in reducing the discount rate for the three-month aluminum cash contract. It fell from $40 in the month of December to $23 per ton.

The LME-registered warehouses provide storage facilities for metal brands registered with the LME, and it is authorized by the LME. The aluminum stocks under the LME-registered warehouses recorded a fall of more than 40 percent, since May of the previous year. It accounts for 634,650 tons.

The metal allocated for shipment is indicated by canceled warrants. At present, it constitutes 54 percent of the total aluminum stocks. Indicating that more aluminum is expected to leave LME-registered warehouses soon.

On the basis of technical analysis, the aluminum has an upside resistance of around $2,575 per ton with a moving average of 21-days and support level of $2,553 with a 100-day moving average.

While lead price fell by 0.6 percent to $1,940.50 per ton and price of Zinc decreased by 1.3 percent to a six-week low of $2,938.50 per ton. On the other hand, the price of tin decreased by 2 percent to $28,490 per ton, and the price of nickel slumped by 1.1 percent to $15,160 per ton.

On 7th January 2025, the benchmark copper price on the LME increased by 1.7 percent, which accounts for $9,031 per metric ton at 15:30 GMT. Since the US election in the month of November, the perspective towards copper has been filled with uncertainty resulting in copper being kept in a narrow range of $9,000. According to the Analyst of Consultancy group CRU Robert Edwards, the price is influenced by macro factors. Nothing can be said certainly about the direction of the market till any solid actions such as US import tariffs take place.

The weak demand for industrial metals in China has significantly affected global prices of metals. This is due to sluggish economic growth and consumption of industrial metals. Also, the copper market is affected due to tight supplies of metals occurring due to operational issues and disruptions.

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