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Copper prices dip despite Li Qiang’s upbeat comments on Chinese economy

IFM_Chinese Premier Li Qiang
Li Qiang stated that his country's growth in the second quarter of the financial year of 2023-24 was expected to be faster than the 4.5% registered during the January-March period

Copper prices dipped recently, as indications from a top Chinese official on more economic stimulus got offset by concerns over slower growth and rising interest rates in the United States and Europe.

Three-month copper on the London Metal Exchange (LME) fell 0.4% to USD 8,358 per metric ton in official open-outcry trading.

London Metal Exchange copper has rebounded by about 7% since hitting its lowest in nearly six months around the April-May 2023 period.

Base metals and wider financial markets saw mood lifters as Chinese Premier Li Qiang said that the world’s second-largest economy will take steps to boost demand and rejuvenate markets.

Li Qiang also stated that his country’s growth in the second quarter of the financial year of 2023-24 was expected to be faster than the 4.5% registered during the January-March period.

However, the economic data for May 2023 missed analysts’ expectations, thus giving out a signal that the world’s second-largest economy may be slowing down.

“My sense is that all those policy measures in China will still be fairly targeted and moderate,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International, while interacting with Reuters.

“Even if you get some measures from China, I don’t think it’s going to encourage a sustained rally. I think the market is likely to be fairly range-bound,” the official stated further.

She added that US interest rates could rise again in July 2023 and the dollar would remain strong, resulting in “sustained macro pressure across commodities”.

Citi analysts have also cut their 2023 annual GDP forecast for China to 5.5% from 6.1% due to “weak confidence prevalent across households, corporates and investors.”

In June 2023, the premium of London Metal Exchange cash copper over the three-month contract retreated to USD 17 a metric ton after touching USD 31, the highest since November 2022, indicating tightening near-term supplies.

On-warrant copper inventories also fell to 25,725 metric tons, the lowest since October 2021, the latest London Metal Exchange data showed.

Inventories of the metal in the Shanghai Futures Exchange and Chinese-bonded warehouses have also been declining.

London Metal Exchange aluminium climbed 2% to USD 2,191 per metric ton in official activity, nickel rose 1% to USD 20,500, zinc advanced 2% to $2,375, and lead gained 1.2% to USD 2,094.50, while tin rose 1.4% to USD 26,000, as per the market data.

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