Copper prices face a slump as the Fed signals prolonged strict policies, and the dollar gains strength, impacting the metal market.
LME Copper for a three-month period fell by 2.1% to $8,169.5 per metric ton. It touched $8,123, marking the lowest since August 17. Copper, which is used in power and construction, has fallen by 3.2% this week.
The discount for near-term delivery versus the three-month copper contract increased, indicating a surplus of immediate supply. It closed at $64 per ton on Wednesday, marking its four-month high, compared to $4.5 on Sept. 5.
Copper, a vital resource in power and construction industries. Witnessed a significant dip, reaching its lowest point in five weeks on the London Metal Exchange (LME).
The drop came as a result of the U.S. Federal Reserve’s indication to uphold stringent policies for an extended period.
Additionally, the dollar surged to a six-month high, further dampening the appeal of metals priced in dollars for those holding alternate currencies.
Ole Hansen, Saxo Bank’s Head of Commodity Strategy. Highlighted that industrial metals experienced a sharp decline due to expectations of prolonged higher rates in the United States, diminishing overall risk appetite.
China’s property market dynamics continue to be a concern, affecting the financial health of property developers and consequently influencing copper prices.
China, a significant copper consumer, plays a crucial role in the metal’s global demand and pricing trends.
Furthermore, rising copper inventories in LME-registered warehouses reached their highest levels since May 2022.
This, coupled with technical selling triggered by copper’s drop below a critical threshold, contributed to the accelerated decline.
In this scenario, the Chilean state-owned copper company, Codelco, witnessed a significant drop in copper production.
Output plummeted by 14% in the first half of the year. Following a 7% decrease from the previous year, amplifying concerns in the copper market.