Copper extends decline as stronger dollar, demand doubts weigh

Copper fell for a fourth straight session on Tuesday, sinking to its lowest in almost two weeks as the dollar strengthened and demand concerns mounted after last week's run to a record high.

Benchmark three-month copper on the London Metal Exchange fell 2.4% to $10,624 a metric ton in official open-outcry trading. It touched $10,577.50, the lowest since October 22 and more than 5% off its all-time peak of $11,200 on October 29.

The pullback "showed current fundamentals not being strong enough to sustain higher prices at this time, and the reversal forced recent wrong-footed longs to surrender," said Ole Hansen, head of commodity strategy at Saxo Bank.

The cash LME copper contract was trading at a $28 a ton discount to the three-month forward <CMCU0-3>, suggesting no pressing need for short-term metal.

The dollar also weighed on prices as it struck a three-month high. A stronger greenback makes dollar-denominated metals more expensive for holders of other currencies. Furthermore, the yuan's slide to a two-week low crimped purchasing power in top copper consumer China. "The outlook now hinges on the broader risk appetite, with near-term support potentially being tested," Hansen said, noting that the recent uptrend was providing support for copper at around $10,550.

Hopes for a trade deal between the United States and China had helped drive copper's rally, but a meeting of the two countries' presidents last Thursday did not yield a conclusive agreement. "I think optimism surrounding the U.S.-China discussions is fading as the dispute is again postponed rather than solved ... there haven't really been any concrete resolutions of important issues," said Thu Lan Nguyen, head of commodity research at Commerzbank.

The LME complex was broadly lower, with aluminium falling 1.4% to $2,860.50 a ton, nickel slipping 0.2% to $15,115, lead also losing 0.2% to $2,023 and zinc down 0.6% to $3,083, even as the cash zinc contract held a $174 premium over the three-month forward <CMZN0-3> amid low stocks.

Tin was the sole base metal to gain ground, edging up 0.3% to $36,140.