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Copper prices fell for the second straight session Thursday, as investors continue to wonder if an economic slowdown in China could limit demand for the industrial metal.
Front-month copper for March delivery was down 1.8% at $3.0585 a pound on the Comex division of the New York Mercantile Exchange. Prices have fallen 6.7% so far this year after hitting a roughly four-year high in late December, with some analysts warning that the market is still currently well supplied and demand could slow moving forward.
China is the world’s largest consumer of base metals, accounting for roughly half of the world’s copper consumption. Data has recently shown a slow start to the year in the country’s manufacturing sector, with activity slowing last month around the Lunar New Year holiday.
Data released Thursday showed a 20% drop in Chinese copper imports from the previous month, the third straight month they have declined.
Concerns about the impact of U.S. tariffs on steel and aluminum and other protectionist trade policies on global economic growth have also hurt sentiment, analysts said. Some think lessened trade and activity globally could weaken demand for industrial metals and weigh on prices.
”There’s a few more questions on the demand side coming through, which everyone was confident about a month ago,” said Colin Hamilton, managing director of commodities research at BMO Capital Markets.
Some analysts have also said there is still uncertainty surrounding several mining labor contracts up for renegotiation this year.
The doubts about the rally come after copper had its best year since 2010, climbing more than 30%, and have coincided with swings in other risk assets like global stocks and oil.
”Copper went down in Chinese trading…and people are acknowledging that post-Chinese New Year trading has not been as encouraging as people thought. People were perhaps too optimistic,” said Vivienne Lloyd, a senior analyst at Macquarie.
A stronger dollar was also hurting commodity prices Thursday by making raw materials more expensive for overseas buyers. The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, was recently up 0.5%.
Among precious metals, front-month gold for March delivery edged down 0.5% to $1,319.90 a troy ounce. Gold has stayed between roughly $1,305 and $1,360 this year, with some analysts expecting rangebound trading to continue based on swings in the dollar and expectations for higher inflation and interest rates.
Gold struggles to compete with yield-bearing assets like Treasurys as borrowing costs rise, but many investors also use it to hedge against higher consumer prices. Investors will be monitoring Friday’s jobs report for the latest reading on the U.S. economy after last month’s report showed a pickup in wage growth.
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