Copper crawls higher on softer dollar, but investors wary about demand

London: Copper prices saw a slight rise on Friday, buoyed by a weaker dollar and supply constraints, yet the gains were restrained due to concerns over high oil prices diminishing demand. The benchmark three-month copper on the London Metal Exchange climbed 0.3% to $14,289 per metric ton by 10:00 GMT, representing a 2% reduction from the previous week's end.

Neil Welsh, the head of metals at broker Britannia Global Markets, conveyed in a note that "metals have seen light turnover again so far this session with copper finding some support with a slightly softer dollar, but the broader tone remains cautious." He added, "High energy costs stemming from the ongoing US-Iran conflict and signs of industrial weakness in China have weighed on sentiment across the complex."

The dollar index reached its strongest level in 17 months this week before weakening on Friday, making commodities priced in US dollars relatively cheaper for foreign buyers. LME copper has risen 16% over the past six months, primarily due to a substantial shift in inventories to the United States, driven by potential tariff prospects there, leading to shortages elsewhere.

Warehouse stocks monitored by the Shanghai Futures Exchange have plummeted by 79% over the past four months to 38,744 tons, marking their lowest level since January 2024. The Shanghai Futures Exchange (SHFE) was closed for China's National Day and will reopen on October 8. The expectation of reduced output from the world's largest copper producer, Chile, has also bolstered the market.

Data released on Wednesday indicated a year-on-year decline of 12.8% in copper production in August. Supervisors at Chile's Escondida copper mine, the world's biggest, dismissed a collective contract offer, potentially leading to a strike and intensifying supply worries. "This adds to an overall slump in output, as the industry struggles to maintain aging infrastructure amidst challenging operating conditions," Daniel Hynes, the senior commodity strategist at ANZ, stated in a note.

Investors are anticipating the release of US September payrolls data on Friday, which could provide insights into the economic situation and indicate whether the Federal Reserve will raise interest rates again. In terms of other metals, LME aluminium increased by 0.5% to $3,137 per ton, zinc rose by 0.1% to $3,729, lead advanced by 0.4% to $1,864, nickel surged 0.3% to $15,675, and tin marginally climbed by 0.3% to $54,500.