Boost from Chinese Manufacturing Data
Prices for most base metals have seen an uptick following the release of encouraging manufacturing data from China. This positive shift in the market is partly attributed to improved manufacturing activity in China, the world’s largest consumer of these metals. November industrial profits in China showed double-digit gains, reinforcing investor optimism regarding copper and other metals.
Copper Leads the Way
Copper, a key industrial metal, recorded gains in both the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE). The three-month copper on the LME rose by 0.5% to $8,615 per metric ton, while the most-traded February copper contract on the SHFE edged up 0.1% to 69,240 yuan ($9,685.54) per ton.
Subdued Spot Demand
Despite the overall positive trend, near-term price gains may be tempered by lackluster spot demand, as noted by analysts at Guotai Junan Futures. After a recent period of restocking, spot demand in China has softened, with premiums reversing to discounts.
Impact of a Weaker U.S. Dollar
The dollar index showed a slight increase but remained near a five-month low. The U.S. dollar is heading towards its worst performance since 2020, driven by rising expectations of rate cuts by the Federal Reserve. A weaker dollar typically makes greenback-priced metals like copper more attractive to international buyers.
Other Metals’ Performance
Other base metals also showed varied movements. LME aluminium dropped by 0.4% to $2,317 a ton, while zinc, lead, nickel, and tin saw increases. On the SHFE, aluminium, tin, and lead prices rose, whereas zinc and nickel experienced declines.
The market is also reacting to supply-side risks, including disruptions in bauxite shipments from Guinea and nickel production in Indonesia following a recent fatal accident.
Global Metals Market Outlook
These developments in the base metals market reflect the complex interplay of global manufacturing activity, currency fluctuations, and supply-side risks. The focus on metals essential for energy transition, like copper, highlights their growing importance in the global economy amidst evolving demand patterns and supply chain challenges.