Firm Dollar and Deflationary Pressures Weigh on Metals Market
LONDON: Copper prices fell on Monday as markets reacted to the lack of clarity around China’s latest stimulus plans, combined with deflationary trends in the world’s largest consumer and a stronger U.S. dollar. However, a boost in Chinese imports offered some support to the industrial metal.
At 1302 GMT, benchmark copper on the London Metal Exchange (LME) dropped 1.5% to $9,645 per metric ton.
Concerns about weaker demand intensified after China reported a slowdown in new bank lending and growth in social financing. These developments deepened deflationary pressures, signaling an urgent need for more decisive stimulus to revive economic activity.
Although China pledged on Saturday to “significantly increase” debt and support the property sector, the announcement lacked specific financial details, leaving markets uncertain. A trader noted that “the weekend policy meeting failed to deliver the stimulus and clarity that markets were expecting.” Tensions also heightened with China conducting military drills near Taiwan, further adding to the uncertainty.
The strengthening U.S. dollar also weighed on copper prices, as it made dollar-denominated metals more expensive for foreign buyers, reducing demand.
Despite the market’s unease, China’s imports of unwrought copper increased by 15.4% in September to 479,000 tons, driven by improving seasonal demand. Additionally, copper stocks in Shanghai Futures Exchange warehouses fell to 156,485 tons, more than a 50% drop since June, indicating stronger demand in the power and construction sectors.
In other metals, aluminium prices slipped by 1.3% to $2,597 per ton, though it remained supported by higher alumina prices, which surged due to supply disruptions in Guinea, a major exporter.
Zinc fell 3.1% to $3,055 per ton, lead declined 2.3% to $2,049 per ton, tin dropped 2.3% to $32,460 per ton, and nickel shed 1.5% to $17,590 per ton.
Adding to the negative sentiment, China’s export growth slowed in September, signaling that manufacturers are cutting prices to offload inventory amid trade pressures from multiple partners.
