METALS-Copper softer on thin volumes with focus on higher inventories

By Pratima Desai

LONDON, Feb 16 (Reuters) - Copper prices softened on Monday due to a firmer dollar and a focus on rising inventories and weak demand prospects in holiday-thinned trading.

China's Lunar New Year holiday this week and Monday's public holiday in the United States mean low volumes and possibly volatile moves due to settlement or rollover of maturing contracts on the London Metal Exchange on Wednesday, traders said.

Benchmark copper CMCU3 on the LME traded 0.1% lower at $12,865 a metric ton in the official ring. It has dropped more than 10% since hitting a record high $14,527.50 two weeks ago.

"With many Asian desks sidelined, liquidity will be patchy with most participants likely to be content to wait for clearer direction from U.S. rates and a potential Chinese demand pulse in March’s post-holiday trade," Britannia Global Markets said in a note.

A higher U.S. currency makes dollar-priced metals more expensive for holders of other currencies, which could potentially subdue demand and undermine prices.

Copper stocks in LME-approved warehouses at 211,850 tons MCUSTX-TOTAL are up more than 50% since January 9.

Ample stocks have created a discount for the cash contract over the three-month forward on the LME CMCU0-3. It was trading at one-year highs around $110 a ton.

In warehouses monitored by the Shanghai Futures Exchange, copper stocks at 272,475 tons CU-STX-SGH have climbed 180% since December 19.

Elsewhere, zinc was down 1.3% at $3,293 a ton CMZN3. It has fallen 8% since hitting $3,575.50 on January 29, the highest since August 2022.

Zinc is also under pressure from higher inventories ZN-STX-SGH in ShFE warehouses, which at 87,025 tons have risen 33% since January 30.

"Ex-China market tightness that supported prices ... has been resolved for now, as China turned to a net exporter of zinc in November/December, concentrate availability improved, and ex-China refined zinc production has risen," analysts at Goldman Sachs said in a note.

In other metals, aluminium CMAL3 ceded 0.2% to $3,072, lead CMPB3 slipped 0.6% to $1,949, tin CMSN3 fell 1.1% to $46,200 and nickel CMNI3 eased 0.1% to $16,960 a ton.