Copper Prices Rise as COVID Cases in China Decline, Demand Remains Uncertain, Reports Reuters

By Zandi Shabalala

LONDON – Copper prices saw an increase on Wednesday, buoyed by a decrease in COVID-19 infections in China, the world’s largest metal consumer, which alleviated immediate concerns regarding demand. However, ongoing pandemic-related lockdowns continued to dampen market sentiment.

Shanghai reported that portions of the city have reached "zero-COVID" status, but strict regulations will remain enforced due to national policies.

China’s lockdowns and apprehensions over potential aggressive interest rate hikes in the U.S. have put pressure on base metals, leading to prices dropping to a near five-month low earlier this week.

According to Caroline Bain, senior commodities economist at Capital Economics, Beijing’s hesitance to implement economic stimulus to stimulate demand will further impact the metals market. "The lockdowns in China have ultimately revealed the stagnation in demand," Bain stated.

By 1610 GMT, benchmark copper on the London Metal Exchange (LME) rose by 1.2% to $9,337 per tonne.

In terms of logistics, China’s COVID-19 crisis has hindered the country’s consumption of cobalt, nickel, and lithium by disrupting transport and impacting battery production, as noted by state-backed research organization Antaike.

Regarding demand, China’s vehicle sales saw a dramatic decline of nearly 48% in April compared to the previous year, affected by lockdowns on factories and showrooms. However, electric vehicle sales thrived, with Chinese brands gaining market share from international competitors.

In the copper sector, April production of copper cathodes in China fell on both a month-over-month and year-over-year basis, attributed to maintenance issues and the COVID-19 pandemic hampering smelters’ output.

On the inflation front, China’s factory-gate inflation dropped to its lowest point in a year in April, providing policymakers with more flexibility to introduce stimulus measures to support a weakening economy.

With the dollar reaching a near two-decade high, metals and other commodities priced in dollars become more expensive for buyers using alternative currencies.

In other market movements, LME aluminium gained 1.2% to $2,786 a tonne, zinc rose by 2.2% to $3,676, lead increased by 0.8% to $2,130, tin climbed 1.2% to $35,955, while nickel saw a decline of 2% to $27,855.