Base metals subdued in thin trade as China shut for holiday

Jan 31 (Reuters) – Copper prices were little changed on Monday, while aluminum edged lower on profit-taking in thin Asian trading as Chinese markets were closed for a week-long Lunar New Year holiday.

Three-month copper on the London Metal Exchange was virtually flat at $9,503.50 a tonne by 0623 GMT. It hit a three-week low of $9,496 on Friday and was on track for a monthly loss of more than 2%.

Aluminum shed 0.4% to $3,069 a tonne, extending losses after scaling its highest since mid-October in the previous session.

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But aluminum headed toward a monthly gain of more than 9%, as high power costs forced some smelters to cut production and traders worried that an escalation of the Ukraine conflict could disrupt exports from major producer Russia.

“Overall, we don’t think there’s a rising tide lifting all boats for the metals sector in 2022. Still, aluminum stands out as our top pick among metals with the most upside potential this year,” said ING senior commodities strategist Wenyu Yao.

But there are potential downside risks, including the prospects of more aggressive interest rate hikes by the US Federal Reserve, she said in a note.

Some “rhetorical changes” from top Chinese officials over the nation’s dual carbon goal were also worth paying attention to as these could swing market expectations, Yao said.

Chinese President Xi Jinping recently said “reducing emissions is not about reducing productivity, and it is not about not emitting at all”, suggesting that some policy fine-tuning was possible, which Yao said “could see larger restarts in aluminum later this year” . read more

FUNDAMENTALS

* The Shanghai Futures Exchange will reopen on Feb. 7.

* Growth in top metals consumer China’s factory activity slowed in January as a resurgence of COVID-19 cases and tough lockdowns hit production and demand, but the slight expansion offered some signs of resilience as the world’s second-largest economy enters a likely bumpy new year . read more

* Copper prices, often seen as a gauge of global economic health, are set to languish this year, a Reuters poll of analysts showed, weighed down by weaker demand as rising interest rates curb economic growth while mines churn out more supply. read more

* LME copper may test a support at $9,394 a tonne this week, and a break below could cause a fall towards $9,144, according to Wang Tao, Reuters analyst for commodities and energy technicals.

* The dollar was near a year-and-a-half high against the euro, with equities markets volatility expected to push it higher in the short-term, making metals costlier for non-US buyers. read more

* Europe needs to diversify its energy supplies, the head of NATO said on Sunday, as Britain warned it was “highly likely” that Russia, the continent’s biggest natural gas supplier, was looking to invade Ukraine. read more

* Zinc slipped 0.4% to $3,596 a tonne, lead dropped 0.4% to $2,255.50, nickel fell 1.9% to $21,910, and tin lost 0.4% to $41,500.

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Reporting by Enrico Dela Cruz in Manila; Editing by Rashmi Aich and Shailesh Kuber

Our Standards: The Thomson Reuters Trust Principles.

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