Copper Prices Under Pressure as Concerns Over Weak Demand Take Center Stage

Copper prices experienced a decline on Monday, with market attention focused on bleak demand prospects, particularly in the primary consumer, China. Concurrently, factors such as outflows from warehouses and a softer dollar served as supportive elements.

The benchmark copper demonstrated minimal changes, holding at $8,349 per metric ton at 1707 GMT. Market activity remained subdued, with expectations of persisting subdued conditions until after the conclusion of the Chinese Lunar New Year holiday in February. The downturn in copper prices over the past year has been attributed to challenges in China's property sector and a global manufacturing slowdown.

China's property market is witnessing a weakening trend at an unprecedented pace, marking a situation not observed in decades. The manufacturing downturn globally is also noteworthy, representing one of the lengthier contractions in manufacturing in over 40 years. These factors have collectively impacted the pricing dynamics of copper and other industrial metals.

A contributing factor to the market sentiment has been the recent weakening of the U.S. dollar. A softer U.S. currency tends to make dollar-priced commodities more affordable for holders of other currencies, potentially boosting demand. Additionally, positive moves by China's state-owned banks to support the yuan by selling the dollar have been viewed as favorable for base metals, given their correlation with the Chinese currency.

Amidst this backdrop, the aluminium market experienced a decline, with prices falling to $2,153 per ton in official rings, marking the lowest level since December 14. Examining other metals in the market, zinc registered a 0.1% loss, reaching $2,460 per ton, while lead advanced by 1% to $2,126. Tin demonstrated a gain of 1.3%, reaching $25,635, while nickel experienced a 0.4% decline, standing at $15,965.

In the broader context, BHP's plans to suspend certain nickel output and South32 putting its nickel operations under review did little to provide support to prices of the stainless steel ingredient. The nickel market remains under pressure from surpluses created by the considerable increase in Indonesian supplies.

The copper market's current trajectory is significantly influenced by concerns over poor demand prospects, particularly in China. The challenges in China's property sector, coupled with a prolonged global manufacturing downturn, have contributed to the downward trend in copper prices over the past year. Factors such as a softer U.S. dollar and supportive moves by China's state-owned banks have provided some relief. However, challenges persist, as seen in the declining prices of aluminium and the broader dynamics in other base metals. The nickel market, in particular, faces additional pressures from surplus conditions resulting from heightened supplies in Indonesia.