Copper fell to a near four-month low overnight extending losses triggered by fears that a deadly virus in China could worsen and impact the top metal consumer’s economy.
The virus, which belongs to the same coronavirus family as Severe Acute Respiratory Syndrome (SARS), has claimed 106 lives as China stepped up preventive measures to limit its spread.
“There is still a high level of uncertainty about how severe this issue is and how far it can spread so I think you will see some further price falls in the short term,” said Commerzbank analyst Daniel Briesemann.
“But it’s too early to say whether the virus will have an impact on real copper demand, at the moment its purely psychological,” he said.
Benchmark copper on the London Metal Exchange (LME) ended 0.7 per cent lower at $USUS5,703 a tonne, recording its 10th straight session of losses. The metal, often used as a gauge for economic health, touched its lowest since October 10 at $USUS5,690.50.
Growth in China, which accounts for nearly half of global copper consumption, slumped to a near 30-year low in 2019, pressured by sluggish domestic demand and trade frictions with the United States.
Analysts say the virus could further weaken China, the world’s second largest economy.
Japanese Economy Minister Yasutoshi Nishimura warned that corporate profits and factory production might take a hit from the outbreak.
Technical relative strength index (RSI) on daily LME chart looks oversold and is back to levels not seen since July 2018, said Marex Spectron analyst Alastair Munro. Resistance sits between $USUS5,850-$USUS5,910.50 a tonne and support into $USUS5,665-96, he said.
The net speculative long in LME copper has fallen week-on-week to 2.5 per cent of open interest or 5,100 lots as at last Thursday.
LME cash copper is expected to average $USUS6,214 a tonne in 2020, supported by a recovery in global economic growth and problems with supply, a Reuters poll showed.
Headline or total stocks of lead in LME-approved warehouses grew by 600 tonnes to 66,800 tonnes, but was still near their lowest since July.
The premium for cash lead over the three-month contract eased from a near six-month high of $USUS27 a tonne to $USUS18.
Exacerbating the tight situation was a large position accounting for 50-79 per cent of available inventories, according to LME data. <0#LME-WHL>
LME lead shed 0.1 per cent to $USUS1,890 a tonne.
The Shanghai Futures Exchange said on Monday it would extend the week-long Lunar New Year holiday by three days to February 2 and will reopen on February 3, in line with the Chinese government’s guideline to contain the outbreak.
OTHER PRICES: Aluminium ended 0.7 per cent lower at $USUS1,752 a tonne, after touching its lowest since December 11, zinc fell 0.4 per cent to $USUS2,230, tin added 0.3 per cent to $USUS16,325, nickel rose 1.7 per cent to $USUS12,825, after touching its lowest since July.