Yahoo Finance Why Did Copper Decline from Its 2-Week High?
Performance of All Base Metals except Tin Slid on February 23
Weak sentiment from China
Copper reached a two-week high on Monday, February 22, 2016, after receiving a boost from global equities gains and the oil. However, it was unable to carry the same positive momentum to Tuesday. On Tuesday, February 23, LME 3M copper declined by 1.04% and 0.47%, respectively, in the London Metal Exchange (or LME) and COMEX.
On February 23, the decline of Chinese equities, along with the central bank fixing a softer midpoint, raised concerns about the Chinese economy and demand growth of metals. The People’s Bank of China set the midpoint rate of the yuan at 6.5273 per dollar prior to the Market’s open. This is 0.17% below the previous fix.
This weakening of the yuan by the central bank resulted in a weakened sentiment. China accounts for more than 45% of the global copper demand, and the economic releases from China should have a noticeable impact on copper prices.
Oil dip and BHP’s statement on copper balance
In addition to the weak sentiment from China, the dip in oil prices also affected the metal’s sentiment. On Tuesday, the gain in oil prices disappeared after Saudi Arabia’s oil minister, Ali Ibrahim Al-Naimi, ruled out the possibility of production cuts in the near future.
Copper prices were also pulled down by the statement from BHP Billiton’s (BHP) chief financial officer, Peter Beaven. Beaven noted that the copper market is expected to remain in a surplus until 2019 because of the surge in investments that could boost the supply. This statement from one of the top copper miners underpinned copper prices on Tuesday, as the supply glut is one of the main reasons behind copper’s downfall.
Along with base metals, the major base metal miners also declined on Tuesday. Freeport-McMoRan (FCX), Glencore (GLNCY), and Alcoa (AA) fell by 8.7%, 2.19%, and 4.26%, respectively. The PowerShares DB Base Metals ETF (DBB) declined by 1.86% on February 23.
The following articles in this series will cover the price action of base metals and major base metal miners on Tuesday, along with an update on inventory levels of base metals in the LME.
Browse this series on Market Realist:
