May 19th LME Market: copper futures fall, inflation fears outweigh political risks in South America

(LME) copper futures on the London Metal Exchange fell on Wednesday as rising inflation pushed investor sentiment into risk aversion, outweighing potential supply disruptions in major South American producing areas.

17:00 London time (00:00 domestic time on May 20th)), LME copper for three-month delivery closed down $403.50, or 3.88%, at $10001.50 a tonne.

Copper prices are on track for their biggest one-day drop since March. Last week, copper futures in London hit a record high of $10747.50 a tonne and have jumped 30 per cent so far this year.

"A lot of good news has been digested," said Carsten Menke, an analyst at Julius Baer Group (Julius Baer).

"the possibility of a mining concession tax increase in Chile, a major producer, and a possible strike, as well as a socialist party taking the lead in Peruvian opinion polls, will have little impact on copper prices," he said. "

Chinese Premier Li Keqiang presided over an executive meeting of the State Council on Wednesday, saying that we should attach great importance to the adverse effects of rising commodity prices, take comprehensive measures to ensure supply, curb the unreasonable rise in prices, and strive to prevent the transmission of consumer prices to residents. We will maintain the stability of monetary policy and the smooth operation of the economy, and reasonably guide market expectations.

Global stock markets fell and the dollar strengthened as unwelcome inflationary threats pushed investors out of assets seen as vulnerable to the cancellation of monetary stimulus.

The Yangshan copper premium rose on Monday for the first time since February, rising to $38.50 a tonne, rebounding from a more than five-year low of $37 on Friday. The Yangshan copper premium reflects China's demand for imported copper.

LME spot copper expanded to $28.75 a tonne from the three-month copper discount, the deepest since June 2020, from $30 a tonne last month.

Chilean Copper Council (Cochilco) said on Wednesday that it sharply raised its forecast for copper prices this year to $4.30 a pound because of expectations of greater copper shortages, reduced inventories and speculative factors.

The union representing the interests of miners at the (Escondida) copper mine in Escondida, Chile, the world's largest copper mine, said on Wednesday that it would prepare for a long strike if management did not change its "bad" attitude towards its labour force and reached a "fair and reasonable" agreement in the upcoming contract negotiations.