|23 February, 2020

Copper bounces despite rise in virus cases, dollar slips

Weaker dollar makes commodities priced in the U.S. currency cheaper for buyers using other currencies

Image used for illustrative purpose. An employee carries copper hoses at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012.

Image used for illustrative purpose. An employee carries copper hoses at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012.

REUTERS/Nacho Doce/File Photo

JOHANNESBURG/LONDON - Copper rebounded on Friday as speculators surprised the market with a bout of buying late in the session despite a rise in new coronavirus cases in China.

Copper was in the red or barely steady for most of the day until the release of negative U.S. purchasing manager data, which in turn hit the dollar index.   

A weaker dollar makes commodities priced in the U.S. currency cheaper for buyers using other currencies. "It's a bit of a strange one, because if the economy's particularly weak, we typically see the base metals react (negatively) to it," said Robert Montefusco at broker Sucden Financial.

"We did see some support at those lower (prices), then we saw a bout of spec buying, and it hit some stops on the upside.

Maybe it's the failure to continue to the downside, so they thought they'd push it to the upside."     

Three-month copper on the London Metal Exchange (LME) rose 0.7% to $5,765 a tonne in final open-outcry trading after falling as low as $5,684.   

Fears over the spread of the virus dragged copper to its lowest in nearly two years this month and sent the metal on its longest losing streak since at least 1977.

COPPER: The global world refined copper market showed a 33,000 tonne surplus in November, compared with a 15,000 tonne deficit in October.            

VIRUS: The coronavirus has infected hundreds of people in Chinese prisons, authorities said on Friday, contributing to a jump in reported cases beyond the epicentre in Hubei province, including 100 more in South Korea.             

"Many market players thought that the worst of the virus was behind us, but it has spread outside China and these concerns have returned," said Commerzbank analyst Daniel Briesemann.

"In the next few weeks, we will get data confirming the impact on economy and metals demand, and this should put prices under more pressure."

NICKEL: LME nickel slipped 1.1% in closing rings to $12,530 a tonne after touching $12,500, the weakest since July last year.    

LEAD SPREAD: The premium for cash lead over the three-month contract rose to $66 a tonne, near its highest since 2011, indicating near-term shortages of material in the LME system.

LME lead slid 2.8% to $1,831 a tonne, its lowest in more than a week.

LME PRICES: LME aluminium added 0.2% to finish at $1,713.50 a tonne, zinc rose 0.1% to $2,115 and tin gained 0.3% to $16,630.   

(Reporting by Zandi Shabalala and Eric Onstad Additional reporting by Mai Nguyen Editing by Kirsten Donovan)

© Reuters News 2020

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