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Copper prices were little changed, aluminium and zinc prices edged up, while the rest of the base metals complex weakened.
The diverse price moves came while investors anxiously awaited a speech by President Xi on Tuesday to commemorate the 40th anniversary of China‘s economic reforms, hopeful for signs of a more proactive fiscal policy being announced.
“Asia markets are trading mixed this morning; China equities are parked in neutral as investors remain hopeful for a more proactive fiscal policy tone from mainland regulators at China’s economic work conference accompanied with a robust personal tax cut,” Stephen Innes, Oanda’s head of trading for Asia Pacific, said in a morning note on Tuesday.
Income tax reductions to the tune of 1.5 trillion yuan ($217.4 billion) could be in store next year to support economic growth in China, a senior official from the country’s State Administration of Taxation told the China Daily newspaper on Monday.
“The country will prioritize individual income tax reduction and include tax exemptions for small- and medium-sized companies and high-tech enterprises, [China Daily] quoted a senior taxation official as saying,” Innes said.
In copper, prices were under pressure due to a combination of rising inventories levels and slower demand during what is traditionally a low season for red metal consumption, according to Chinese broker Guotai Junan.
The most-traded February copper contract was little changed at 49,100 yuan per tonne as at 10.42am Shanghai time.
Copper stocks in the Shanghai-bonded zone stood at 410,000-415,000 tonnes on Monday, according to Fastmarkets MB’s latest assessment. This is up from 381,000-388,000 tonnes on November 5, but down from a 2018 peak of 517,000-538,000 tonnes on July 2.
“Chinese smelters have exported several thousands of copper cathode, but we can’t see an obvious increase in exchanges warehouses nor in the Chinese bonded area, which means there are some invisible stocks in the market,” a senior copper analyst based in Shanghai said.
“Participants should be cautious of these invisible copper stocks; once a big delivery against exchange warehouses happens in January, copper prices are very likely to go lower,” the analyst added.
Adding further downward pressure to copper prices was the news that Sterlite Copper will be allowed to re-open its 400,000-tonne-per-year Tuticorin copper smelter in the southern Indian state of Tamil Nadu.
“A tribunal ordered the state pollution board to approve the plant’s restart within a week. The smelter produces around 400,000 tonnes per year, making up around half the country’s total copper output,” ANZ Research said on Tuesday.
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