Copper Gains, Shrugging Off China Push Against Commodity Surge

Copper rebounded, shrugging off China’s stepped-up fight against soaring commodities prices as the dollar slipped and inflation fears ebbed.

The dollar weakened against most Group-of-10 currencies as a disappointing index of U.S. economic activity boosted sentiment that a recent spike in inflation is transitory, further damping speculation on any Federal Reserve tightening moves. Copper fell as much as 0.9% earlier after China summoned top executives to a meeting that threatened severe punishment for violations ranging from excessive speculation to spreading fake news.

The warning from Chinese officials comes after a surge in commodities prices fueled fears that faster inflation could dent economic growth. The push to rein in metals prices rippled across markets, with steel and iron ore tumbling before prices steadied. Some analysts questioned how much control China can exert over global prices, and with broader price worries easing on Monday, concerns over the outlook for tight copper supply returned to the fore.

“I don’t think China can do too much when it comes to copper,” Citigroup Inc. analyst Max Layton said during an interview with Bloomberg TV. “I don’t think China is going to slow its growth just to limit commodity prices.”

Copper Gains, Shrugging Off China Push Against Commodity Surge

Investors have been piling into industrial metals on bets that the world will rebound strongly from the pandemic.

Layton said he thinks the rally in commodities has just started. Preference shifts during the pandemic have resulted in a “colossal” backlog of home renovations and consumer goods, and there’s “a ton of pent-up demand” in automobiles as economies reopen and people travel again, he said. “You’ve got to stick with this rally.”

There’s been a steady drumbeat of government warnings about the consequences of commodity prices that are near the highest level in almost a decade. But aside from changes to trading rules at futures exchanges, there hasn’t been a lot of action. Beijing is likely to face a “potential exhaustion of policy options” to restrain the rally, Citigroup Inc. said in a note.

In targeting commodity prices, authorities are fighting trends over which they have only partial control as the world economy reboots with supply chains stretched. The government is also tackling the consequences of its own efforts to reduce greenhouse gas emissions, which have contributed to price gains.

Copper for three-month delivery rose 0.7% to settle at $9,947 a metric ton on the London Metal Exchange. Prices slid 3.5% last week, the most since September. Nickel and aluminum also gained, while lead, tin and zinc slipped.

©2021 Bloomberg L.P.

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