Copper edges higher despite persistent macro headwinds

Copper prices saw a slight rise on Tuesday following a significant sell-off the previous day. Despite factors like a strong dollar, high oil prices, and worries over Chinese demand, the benchmark three-month copper on the London Metal Exchange increased by 0.34% to $14,461.50 per metric ton. The most traded copper contract on the Shanghai Futures Exchange also rose by 0.09% to 109,530 yuan ($16,335.08) per ton.

LME copper fell by 1.4% on Monday, hitting its lowest in over ten days at $14,343 after weak Chinese industrial profits data exacerbated concerns about rising oil prices and a stronger dollar. Traders are eagerly anticipating China’s manufacturing purchasing managers data later in the week to gauge further signals on metals demand.

However, restocking activities before China’s National Day holiday, which begins next Thursday, are slowing down, adding to demand concerns. Analysts at Chinese broker Galaxy Futures noted that downstream copper users in China have largely completed pre-holiday restocking and are purchasing only as needed following the recent price decline.

Oil prices and the US dollar were on the rise, with Brent crude nearing $106 a barrel due to ongoing concerns about Middle East supply disruptions. The dollar index approached a two-month high due to rising Treasury yields, with markets pricing in over a 70% chance of another Federal Reserve rate increase in October. Higher interest rates, typically linked to economic slowdown, generally reduce demand for copper.

Other LME metals also experienced fluctuations, with aluminium rising 0.43%, zinc gaining 0.26%, and lead advancing 0.34%, while nickel dropped by 0.73%.