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LME Copper Extends Rout As China Virus Death Toll Climbs

28 Jan 2020 7:51 pm
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Mumbai (Commodities Control) – Copper fell to a three-month low on Tuesday, 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.

Benchmark copper on the London Metal Exchange (LME) traded at a steady $5,743 a tonne in official trading rings, recovering from earlier losses. The metal, often used as a gauge for economic health, touched its lowest since Oct. 16 at $5,701.

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 $5,850-$5,910.50 a tonne and support into $5,665-96, he said.

The net speculative long in LME copper has fallen week-on-week to 2.5% of open interest or 5,100 lots as at last Thursday, according to broker Marex Spectron.

Headline or total stocks of lead in LME-approved warehouses grew by 600 tonnes to 66,800 tonnes, but were still near their lowest since July.

The premium for cash lead over the three-month contract eased from a near six-month high of $27 a tonne to $18.

Exacerbating the tight situation was a large position accounting for 50-79% of available inventories, according to LME data. LME lead gained 0.3% to $1,898 a tonne.

Meanwhile aluminium fell 0.3% to $1,759 a tonne, after touching its lowest since Dec. 11, zinc gained 0.7% to $2,255, tin added 0.2% to $16,300, nickel rose 1.7% to $12,825, after touching its lowest since July.

The Shanghai Futures Exchange said on Monday it would extend the week-long Lunar New Year holiday by three days to Feb. 2 and will reopen on Feb. 3, in line with the Chinese government's guideline to contain the outbreak.

(Commodities Control Bureau)

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