Abitibi Metals boosts resource by 62% at B26 polymetallic deposit in Quebec
Indicated resources increased to 11.3 million tonnes from 6.9 Mt.
Copper extended losses with the dollar strengthening and prices facing sustained pressure from weak Chinese demand.
The metal has shed 14% since rocketing to a record above $11,000 a ton in May. Soft market conditions in top consumer China have handed copper’s more bullish investors a reality check, and prices have continued to decline even amid tentative signs of a demand recovery.
“The sharp rise of the copper price in May undermined downstream demand, leading to higher inventory,” HSBC Holdings Plc analysts including Howard Lau wrote in a note. “However, we believe pent-up demand will gradually be released with the price correction seen from mid-June onward.”
There were also further signs that a copper short squeeze on Comex is easing, with July delivery contracts trading at the widest discount to September futures in two months. The spread between the contracts had spiked in May to trade at an unprecedented premium, putting pressure on the holders of short positions and fueling copper’s ascent to a record high.
Traders have been rushing to ship metal to Comex warehouses to close out their contracts ahead of the July contracts’ expiry. And after a surge in inventories on the London Metal Exchange and the Shanghai Futures Exchange, large-scale inflows to Comex could further dampen sentiment.
A stronger dollar is also hurting commodities priced in the currency. The Bloomberg Dollar Spot Index rose to its highest point since November earlier on Wednesday, before paring those gains.
Copper fell 0.3% to $9,540 a ton on the LME at 3:51 p.m. Other metals were mixed, with aluminum up 0.4% and zinc trading 2.3% higher.
Industrial metals had staged a broad rally through mid-May on hopes for a pick-up in global consumption and long-term bets on supply tightness. Still, China’s patchy economic recovery and weaker currency — as well as ebbing prospects for US interest rate cuts this year — blunted gains.
Tight labor markets, geopolitical developments, and a loosening of financial conditions all added to potential upside risks for US inflation, Federal Reserve Governor Michelle Bowman said in a speech on Tuesday. She reiterated her view that borrowing costs should remain elevated.
The HSBC analysts said they were optimistic about copper demand in the second half of the year given potential spending on China’s power grid, as well as a strong outlook for renewables, electric vehicles and manufacturing. Inventories in China have already started to fall from unseasonably high levels.
Read More: Hedge funds’ bullish copper bets run into China’s slowdown
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