New York, October 25: Copper futures on the Chicago Mercantile Exchange (COMEX) fell on Wednesday. Although China, the top metal consumer, has introduced more economic stimulus measures, the strong US dollar exchange rate and tense geopolitical situation have caused downward pressure on copper prices.
As of the close, copper futures fell by 2.1 cents to 3.8 cents, with the most actively traded December 2023 copper futures falling by 3.3 cents or 0.91% to close at US$3.591/lb.
December copper futures traded in a trading range of $3.586 to $3.649.
Copper futures have fallen 3.9% so far in October, mainly due to concerns about weakening demand outside China.
In Europe, growth indicators ranging from industrial output data to Purchasing Managers Surveys (PMIs) and business sentiment data in recent weeks have pointed to weak external demand, cautious consumer sentiment and a high interest rate environment. The regional economy has either stagnated or contracted.
Domestic demand in China, the number one buyer of industrial commodities, remains a relative bright spot, and further government stimulus measures will support the expansion of domestic demand. China this week made a rare mid-year adjustment to its annual budget to allow for more fiscal spending, a move that underscores the top leadership's focus on sustaining an economic recovery. The National People's Congress approved the issuance of an additional 1 trillion yuan ($137 billion) of sovereign bonds this quarter specifically for disaster relief and infrastructure construction.
The U.S. dollar exchange rate rose for the second consecutive day, suppressing copper futures quoted in U.S. dollars. Federal Reserve Chairman Jerome Powell's speech later on Wednesday will be closely watched for clues on the path of U.S. interest rates. Anything that points to further tightening of monetary policy could have a negative impact on copper, as rising interest rates squeeze manufacturers and consumers.
There are new signs that high interest rates in Western economies are causing a slowdown in the electric vehicle industry, a major emerging driver of copper demand. Battery maker LG Energy Solutions plunged after forecasting slower sales growth in 2024. General Motors Co said on Tuesday it was reconsidering its growth plans as sales of plug-in hybrid vehicles fell below expectations.
The recent COMEX copper futures contract has fallen 4.13% so far this month and 6.14% so far this year. Wednesday's closing price fell 1.58% from the same period last year and is 27.53% lower than the historical peak of $4.929 set in March 2022. Because Western major The high interest rate environment brought about by the economy's aggressive interest rate hikes has suppressed economic growth and demand for goods, and China's economic performance has been weaker than earlier expectations.
COMEX copper futures fell 14.6% in 2022, mainly because the global economic growth outlook is worrying. High inflation has prompted European and American central banks to actively raise interest rates to curb inflation, exacerbating the risk of economic recession. By comparison, copper in 2020 and 2021 has recorded gains of 25% for two consecutive years. The green transformation of the global economy and electrification have helped boost additional demand for this metal widely used in the power and construction industries, while copper mines are facing Disruptions such as underinvestment and production disruptions.
On Wednesday, the Shanghai Futures Exchange's December 2023 copper contract closed up 720 yuan at 66,830 yuan per ton. Bonded copper futures for December on the Shanghai International Energy Trading Center (INE) rose 750 yuan to 59,390 yuan per ton.
On Wednesday, the trading volume of COMEX copper futures was 80,335 lots, compared with 103,860 lots on the previous trading day; the short volume was 224,704 lots, compared with 225,410 lots on the previous trading day.
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