Comex copper facing dollar headwind, market posts small deficit

The Comex copper price continued its descent Friday, October 21 due to the same combination of a multi-month high dollar and questions over Chinese demand.

Copper for December settlement on the Comex division of the New York Mercantile Exchange fell 0.55 cents or 0.3% to $2.0905 per pound. The contract has now declined nine consecutive sessions.

Comex gold for December delivery edged down $1.30 or 0.1% to $1,266.20 per oz. Trade has ranged from $1,261.70 to $1,267.70.

Yesterday, the International Copper Study Group (ICSG) said the refined copper market was in a surplus of around 133,000 tonnes in July, although it was in a deficit of around 264,000 tonnes in January-July.

The trade group added that Chinese refined copper imports were at the lowest monthly total since April 2013, raising concerns that despite economic expansion of 6.7% in the third quarter, the world’s largest end-user of copper isn’t consuming as much red metal as expected.

But the country is still producing at a high rate with Chinese refined copper metal output in September coming in at 725,000 tonnes, a year-on-year increase of 7.2%, according to data from the country’s National Bureau of Statistics.

Still, a major headwind is the surging dollar, which was up 0.4% to 98.72 on the dollar index – the highest point since early March and the second consecutive major uptick.

“Base metals risks still very much appear to the downside as contrary economic policy strategies play out in currency markets with the US dollar looking well over-bought against its peers,” a trader said.

Another week of stock inflow into LME-registered warehouses after a fairly light week last week may be weighing on sentiment too. In the first four days of the week, stock inflow totalled 13,350 tonnes. But cancelled warrants continue to climb – they are at 104,850 tonnes, up from a low of 38,975 tonnes at the end of August.

“We should get a good feel for market sentiment by seeing whether the lower prices attract bargain hunting or whether short selling has emerged,” Metal Bulletin analyst William Adams said. “We remain broadly bullish, especially with cancelled warrants on the rise.”

There is no scheduled news today, but Federal Reserve member Daniel Tarullo is scheduled to speak today.

Meanwhile in European, Germany’s DAX and France’s CAC-40 were virtually unchanged from the previous settlement, while the dollar strengthened by 0.5% to $1.0882 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex gained 24 cents or 0.5% to $50.87 per barrel, while Comex silver for December settlement was recently trading at $17.520 per oz., down 2.9 cents.

(Editing by Tom Jennemann) 

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