Copper fell in London as stockpiles expanded the most since March and some investors viewed last week’s rally as excessive. The LME’s three-month copper contract on Monday was down 0.4 per cent at $7,125 a metric ton.
Last week, copper futures rose to the highest in almost 19 weeks on prospects for higher demand as employers in June added the most workers since 2012 in the U.S., the world’s second-largest user of the metal.
‘Recent economic data have been better than expected which seems to be lifting sentiment, but the stronger dollar has become a bit of a headwind now the initial buying has run its course,’ said William Adams, head of research at FastMarkets.com.
Investors are waiting to see if record share prices will be justified by quarterly earnings reports and forecasts in the United States and elsewhere, with aluminium producer Alcoa kicking off the U.S. earnings season on Tuesday.
London Metal Exchange copper stocks are near six-year lows, supporting prices, while production of refined copper has faltered due to a series of smelter outages this year. A six-month halt on exports from major producer Indonesia has exacerbated tight conditions.
The metal declined “ahead of uncertainty surrounding the Indonesian elections,” Cailey Barker, an analyst at Numis Securities Ltd. in London, wrote in a note. “The impact on commodity exports with a change of leadership is unclear. Either way, we do not expect a sudden lifting of export restrictions.”
“With the inventories increasing, we’re seeing a little bit of a negative tone in the market, especially since the rally we had last week was a little bit overdone,” Tom Power, a senior market strategist at RJO Futures in Chicago, said in a telephone interview.
Copper stockpiles monitored by the London Metal Exchange increased 1.8 percent to 159,350 metric tons, daily data showed, driven by a 48 percent surge in Bussan, South Korea. The metal’s 14-day relative-strength index stayed above 70 since July 2, a level seen by some traders who study technical charts as a sign that the price is poised to fall.
“I’m not too concerned of any major pullback. The price drop may be a buying opportunity,” Power said.