China, dollar weigh on prices

China and dollar

Base metal prices fell further in official London Metal Exchange (LME) trading on Monday, as more negative data from China's property market hit investor sentiment, while a strong dollar also pressured prices.

Chinese property investment fell by 10pc on the year over the first five months of 2024, according to the National Bureau of Statistics, accelerating from a 9.8pc drop in January-April. Sales by floor area in the first five months fell by 20pc on the year, while new construction starts by floor area dropped by 24pc.

Additionally, home prices in China also fell in May, dropping by 0.7pc on the month, the largest such fall in a decade. Existing home values fell by 1pc, the steepest drop since the current data methodology began in 2011.

The dollar remained strong compared with other currencies after US Federal Reserve officials decided to keep the Fed's target interest rate unchanged at 5.25-5.5pc last week, while indicating that they expect to make only one quarter-point benchmark interest rate cut later this year — down from three possible cuts previously penciled in for 2024.

The US dollar index, which measures the currency against a basket of six others, was at 105.552 at the end of the official session, roughly flat from 105.570 at the same time on Friday.

Three-month LME copper prices dropped by 1.7pc to $9,615/metric tonne (t) in today's official session, while in the US, the Chicago Mercantile Exchange copper contract for the next active month dipped by 1.1pc to $4.45/lb.

Three-month aluminum fell by 1.7pc to $2,487/t.

China's aluminum production hit a record of around 3.7mn t in May, with output in Yunnan province showing a sharp uptick after heavy rains saw an end to production curbs owing to lower hydropower generation. Around 330,000 t/yr of additional capacity is expected to be brought back on line in Yunnan this month. Higher output in China could lead to lower prices in the coming weeks.

Three-month nickel prices edged down by 0.7pc to $17,375/t, while three-month lead fell by 0.6pc to $2,150/t.

Zinc was the only base metal to post higher prices today, with the three-month contract rising by 0.5pc to $2,803/t, while three-month tin dropped by 2.5pc to $31,900/t.

The July futures contract for WTI, the US crude benchmark, rose by $1.88/bl to $80.33/bl.