Copper prices fell in London on Monday due to rising inventories, but physical demand in China has increased and will likely continue to rise if prices remain relatively stable.
Three-month copper on the London Metal Exchange (LME) was down 0.7% at $9,534.50 per metric ton by 0436 GMT, while the most traded August copper contract on the Shanghai Futures Exchange (SHFE) rose 0.1 percent to 78,200 yuan ($10,759.94) per ton.
Copper stocks in LME-approved warehouses climbed to 180,125 tonnes on June 27, from around 104,000 tonnes in mid-May.
However, with the fall in prices, the physical demand for copper has improved.
“Most semi-producers have an annual target and therefore need to increase the total purchasing volume in the third quarter when prices fall,” said He Tianyu, a copper analyst at CRU.
The LME copper price hit a record high of over $11,100 in May, but has fallen 14% since then. In June alone, the contract fell 4.4%, the biggest monthly loss since August 2023.
Copper consumption by wire rod producers fell by double digits in the second quarter year-on-year, the analyst said.
Most wire rod producers sign their contracts based on previous monthly or weekly prices, so their consumption will improve if prices remain relatively stable, he added.
The Yangshan copper discount tightened to $7 per tonne on June 28 from just $20 in May, indicating an improvement in appetite for copper imports in China.
However, prices are likely to remain under pressure in the third quarter as Chinese smelters are likely to increase supply after completing their traditional maintenance season, CRU’s He said.
Demand from the copper tube sector will also be seasonally weak in the third quarter, the analyst added.
LME zinc fell 0.5% to $2,922 a tonne, lead was down 0.5% to $2,213 a tonne, while tin rose 0.8% to $33,010, aluminium fell 0.3% to $2,518 and nickel edged up 0.2% to $17,320.
SHFE zinc fell 0.1 percent to 24,385 yuan a tonne, aluminum rose 0.2 percent to 20,290, while nickel rose 1.1 percent to 136,870 yuan, lead rose 1.7 percent to 19,680 yuan and tin climbed 1.7 percent to 275,210 yuan.
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($1 = 7.2677 yuan) (Reporting by Mai Nguyen in Hanoi; Writing by Mrigank Dhaniwala)
