Dollar Strength and Zinc Smelter Shutdown Impact Copper Prices

London: On Monday, copper prices faced downward pressure amid a strengthening dollar, coupled with concerns about Chinese demand, triggered by the surprising decision of the country’s central bank to leave key interest rates unchanged.

Meanwhile, zinc prices on the London Metal Exchange (LME) surged to $2,615 per metric ton, marking the highest point since January 3. This leap follows Nyrstar's announcement of the suspension of zinc smelting operations at its Dutch plant in Budel during the second half of January.

Benchmark copper showed little change at $8,340 per ton at 1141 GMT, rebounding from an earlier low of $8,308.

A copper trader noted, "The dollar is a significant factor for base metals. The market was disappointed by the lack of action from China’s central bank," and anticipated subdued activity due to a U.S. holiday.

China’s central bank's decision to keep the medium-term policy rate steady on Monday defied market expectations for a cut, as a weaker currency limited the potential for near-term monetary easing to stimulate the economy.

The strengthening U.S. dollar makes dollar-priced metals more expensive for holders of other currencies, potentially dampening demand.

Base metals markets are eagerly awaiting Chinese data on investment, industrial output, GDP, and house prices scheduled for Wednesday, seeking insights into future demand prospects in the world’s largest metals consumer.

Technically, copper finds itself confined by strong support at the 100-day moving average of $8,290 per ton and resistance at $8,390, where the 50-day and 200-day moving averages converge.

Traders speculate that Nyrstar’s suspension of zinc production in Europe, driven by high energy costs and challenging market conditions, could tighten the European market if the halt is prolonged.

Budel’s annual capacity is 315,000 metric tons of zinc, contributing to the global supply of the metal used for galvanizing steel, estimated at about 14 million tons this year. Zinc saw a 2.2% increase, reaching $2,570 per ton.

In the realm of other metals, aluminum declined by 0.6% to $2,206, lead gained 0.2% at $2,094, tin rose 0.3% to $24,705, and nickel retreated 0.4% to $16,275.