Copper price rose for the second consecutive day on Tuesday following its drop to the lowest since April 14 on Friday despite the announcement of China’s first auction from state metal reserves.
Copper for delivery in July rose 1.5% from Monday’s settlement price, touching $4.259 per pound ($9,390 per tonne) midday Tuesday on the Comex market in New York.
Click here for an interactive chart of copper prices
The metal price tumbled last week after the Federal Reserve suggested that it might raise interest rates sooner than expected and China’s announcement that would release strategic metal reserves.
But even if planned sales to end-users boost domestic supply, investors have questioned China’s ability to have a sustained impact.
“We do not think the rally is over,” Citigroup Inc. analysts said in an emailed note.
According to the bank, Beijing’s measures “target managing expectations and deterring speculators rather than solving supply/demand imbalances.”
“We’re at a point where a lot of the cyclical tailwinds if they haven’t blown themselves out, are past their peak,” Colin Hamilton, MD for commodities research at BMO Capital Markets, told Bloomberg.
“That fear that things are just going to go higher and higher and higher – that [has] come out of the market now.”
China’s state reserves administration said on Tuesday it would publicly auction a total of 100,000 tonnes of non-ferrous metals early next month in the first round of a rare release of its stockpiles.
The National Food and Strategic Reserves Administration said in three separate notices it would auction 20,000 tonnes of copper, 30,000 tonnes of zinc and 50,000 tonnes of aluminium on July 5-6.
The amount of zinc being sold is equivalent to 5.7% of China’s monthly production, based on official data for May. For copper, the auctioned volume is 2.3% of May’s refined output and for aluminium it is 1.5%.
The copper and zinc sales will take place on an online platform belonging to state-owned miner and metals trader China Minmetals Corp, while the aluminium auction will be on a site operated by another state-run firm, Norinco, the notices show.
The bidding hours will be from 8 a.m.-12 p.m (0000-0400 GMT) and 1 p.m.-6 p.m. (0500-1000 GMT). It was not immediately clear what the starting price in each auction would be.
Companies wishing to bid must be involved in processing and manufacturing and should register on the e-bidding platform by 4 p.m. on June 27, the notices said.
Breakdowns of the batches of copper, zinc and aluminium to be sold showed all of the metal had entered storage after 2008 and currently located in warehouses across China.
Bidders are able to inspect the quality of the metal in warehouses on June 30 and July 1 provided they have put down a deposit and arranged a viewing.
(With files from Reuters and Bloomberg)