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Copper prices in Shanghai closed lower Wednesday ending a two-day rally. The drop was triggered by a stronger greenback and investors' profit-taking, said analysts.
September copper, which is the most actively traded copper contract, closed at 29,780 yuan (US$3,588) a ton, down 300 yuan a ton. While all copper contracts saw a drop between 100 yuan to 400 yuan per ton.
"There was a media report that the United States will raise interest rates in the long term and this has led to a buoying effect on the US dollar," said Wang Fei, analyst with Southwest Futures Inc.
With a strong US dollar, more copper can be bought with the same amount of money and this may result in a price drop for the industrial metal, Wang noted.
In the global market, commodities including copper are priced in the greenback.
Wang's view is backed by Wu Qizhi, an analyst with China Aviation Futures Co Ltd. Some investor's profit-taking has also led to the drop to some extent, he added.
On hearing the news, investors sold the metal to cash out the profit, fearing a further price drop will counteract their gains.
Copper prices surged by around 1,000 yuan a ton to end around 29,000 yuan a ton in the past week.
Despite yesterday's fall, analysts expect copper prices will follow an upswing trend till the first half of this year, saying China's thriving manufacturing economy will trigger a bigger appetite for copper.
China, the world's largest copper consumer, used 2.9 million tons of copper last year, a year-on-year increase of 9 percent. While its copper import accounted for around 45 percent of its demand.
The country's copper demand this year is expected to hit 3.5 million tons, 1.9 million tons of which can be met by domestic copper makers.
"Since there still is a stringent supply of the metal, copper prices will still keep rising, thought there may be some correction during the trading," said Wu.
Copper prices have soared since late last November, and analysts expected that the metal may keep its momentum as recovering global economy increases demand.
Copper is the most heavily traded contract on the Shanghai Futures Exchange.
(Eastday.com March 4, 2004)
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