Recasts, adds comment and changes dateline from Beijing
By Pratima Desai
LONDON, May 8 (Reuters) –Copper prices fell on Wednesday as a firm dollar triggered profit-taking, but expectations of robust demand from the energy transition and new technologies along with concerns about tight supplies supported sentiment.
A stronger US currency makes dollar-priced commodities more expensive for holders of other currencies, which would subdue demand. This relationship is used by funds which trade using buy and sell signals from numerical models.
Benchmark copper CMCU3 on the London Metal Exchange (LME) was down 1.5% at $9.876 a metric ton by 0948 GMT.
Prices hit a two-year high at $10,208 last week, coming close to the record high of $10,845 a ton hit in March 2022.
Expectations are for shortages to be a feature of the market for some years as demand from electric vehicles and new technologies such as artificial intelligence and automation accelerate.
“Base metals are seeing a significant reemergence of investment interest recently. As a result of the pandemic and Ukraine invasion, there has been a renewed realization…that commodities are a critical part of the global economy,” said Guy Wolf, global head or analytics at Marex.
“Whilst the immediate focus was on gas and power, attention has now turned towards base metals, considered as ‘transitional commodities’, where demand will be positively impacted by the de-carbonisation process.”
In the short-term, however, concerns about demand in top consumer China are a focus.
Sluggish Chinese demand is reflected in copper inventories at warehouses monitored by the Shanghai Futures Exchange (SHFE) climbing to above 287,000 tons from around 33,000 tons at the start of this year CU-STX-SGH.
The Yangshan premium SMM-CUYP-CP dropping to a record low near zero in April is an indication of China’s fading appetite for copper imports.
China has copper resources, but not enough for its needs and is typically an importer.
In other metals, aluminum CMAL3 fell 1.5% to $2,530, zinc CMZN3 loses 1.7% to $2,908, lead CMPB3 retreated 0.6% to $2,229, tin CMSN3 was down 1.2% to $32,200 and nickel CMNI3 ceded 2.9% to $18,700.
Reporting by Pratima Desai; Editing by Varun HK
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