Copper futures are extending their losing streak to two, driven by concerns over US stimulus and the resurgence of COVID-19 in China. The red metal’s losses were capped by a weakening greenback, as well as optimism from some of the largest miners in the world.
March copper futures tumbled $0.0105, or 0.29%, to $3.619 per pound at 17:14 GMT on Tuesday on the New York Mercantile Exchange. Copper has slumped to as low as $3.57 over the last week, but the industrial metal is looking to maintain its $3.60 to $3.65 range to close out the month.
It has been two weeks since President Joe Biden unveiled his $1.9 trillion stimulus and relief proposal, promising that it would be delivered almost immediately. However, Senate Majority Leader Chuck Schumer warned that a comprehensive agreement may not be passed for another four to six weeks.
Since copper prices follow the broader financial markets, this could force the red metal to retreat below $3.60 until US stimulus spending is passed.
Over in China, the country has witnessed a resurgence in COVID-19 infections, resulting in the government imposing new lockdowns on 30 million people. This is big news for copper markets since it is the world’s largest industrial metal consumer. The world’s second-largest economy has also been stockpiling copper over the last nine months as it continues to recover in the aftermath of the public health crisis.
According to various reports, Chinese importers are turning to high-purity copper scrap to avoid the rejection risk under a new import policy of cargoes. Sources told Fastmarkets:
We prefer buying No 1 recyclable copper material because it does not encounter any problems for custom clearance. But now the No 1 material is becoming expensive.
Chinese bids for the cleanest material have increased the most, as it is a substitute for birch/cliff.
But copper’s slide has been limited by a slumping greenback. The US Dollar Index, which gauges the buck against a basket of currencies, tumbled 0.26% to 90.15, from an opening of 90.39. A lower buck is good for dollar-pegged commodities because it makes it cheaper for foreign investors to purchase. The DXY has fallen 0.4% over the last week.
Despite copper mines experiencing zero mined supply growth in the first ten months of 2020, many of the world’s biggest companies anticipate greater output over the next year as they satisfy demand and benefit from higher prices. Market analysts have sounded the alarm that the market deficit could turn into a modest surplus, forcing prices to retreat from January’s highs.
In other metal markets, March gold futures dipped $4.50, or 0.242%, to $1,850.70 per ounce. March silver futures picked up $0.046, or 0.18%, to $25.53 per ounce. March platinum futures added $2.70, or 0.24%, to $1,107.40 an ounce. March palladium futures shed $19.90, or 0.85%, to $2,327.00 per ounce.