METALS-Copper edges lower as Chinese COVID cases multiply

Updates throughout, adds LONDON dateline

LONDON, Dec 22 (Reuters) – Copper prices edged lower on Thursday as an accelerating wave of coronavirus infections in China, the biggest consumer, eroded demand.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was down 0.4% at $8,363.50 a tonne at 1100 GMT.

Prices rose sharply in November as China began dismantling its economically damaging zero-COVID policy. But while this may boost demand in the longer term, it has allowed the virus to sweep through the country, disrupting business.

A Shanghai hospital told its staff on Thursday to prepare for a “tragic battle” as half of the city’s 25 million people will likely get infected by the end of next week.

“The relaxation of China’s zero-COVID-19 restrictions has lifted the market mood much more than it will lift demand,” said Julius Baer analyst Carsten Menke.

Measures to support China’s slumped property market are unlikely to lead to rapid recovery and growth in other countries will not be strong enough to compensate for China’s weakness, he said.

“2023 will be another cyclically challenging year for copper and industrial metals more broadly … That said, the structural outlook remains bright, as copper is set to join the energy-transition-driven battery-metals super cycle. Short-term setbacks should be seen as longer-term buying opportunities.”

Copper is used in electric wiring. Slowing economic growth has pulled prices down 14% this year.

In a sign of slack demand, Chinese Yangshan copper import premiums fell to $40 a tonne from around $145 in early November. SMM-CUYP-CN

However, copper inventories in Chinese bonded and Shanghai Futures Exchange warehouses are very low compared to typical levels, offering little buffer for when demand rises. SMM-CUR-BON, CU-STX-SGH

LME aluminium CMAL3 was down 0.3% at $2,384 a tonne, zinc CMZN3 fell 0.9% to $2,984, nickel CMNI3 slipped 3.6% to $28,520 and tin CMSN3 was 0.9% lower at $23,855.

Lead CMPB3 was the lone riser, up 1.6% at $2,248 a tonne.

(Reporting by Peter Hobson Additional reporting by Brijesh Patel in Bengaluru; Editing by Kirsten Donovan)

((peter.hobson@thomsonreuters.com))

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