Copper stumbles as risk-off sentiment ahead of US elections weighs

Copper prices declined on Tuesday as investors adopted a risk-averse stance before the US midterm elections, exacerbated by a weaker Chinese yuan, which made dollar-priced commodities more costly for Chinese buyers. The benchmark three-month copper price on the London Metal Exchange slipped 1.27% to $14,163.50 per metric ton by 0030 GMT. Meanwhile, the Shanghai Futures Exchange's primary copper contract fell 0.18% to 108,380 yuan ($16,302.65) per ton.

Market observers are closely monitoring the US midterm elections, which could influence future fiscal policy and spending, as well as the evolving US-Iran conflict, both of which have cast uncertainty over the global growth outlook, according to David Wilson, head of metals strategy at BNP Paribas. The outcome of the House races appears favorable for Democrats, although the Senate race remains highly competitive.

The greenback rose 0.33% against the yuan, adding pressure to copper prices by elevating the expense of dollar-denominated purchases for Chinese purchasers. However, this decline was somewhat mitigated by indications of constrained physical supply within China. The Yangshan copper premium, serving as a measure for imported metal demand, hovered near a decade-high of $200 per ton on Monday due to seasonal production cuts.

Wilson noted that smelting operations in China appear to be gradually reducing output rates, though this is typical during this period of the year. Copper inventories held in warehouses overseen by the Shanghai Futures Exchange (SHFE) stood at 44,612 tons as of Friday, a significant decrease of over 75% from six months prior. Among the other metals tracked by the LME, aluminum dropped 1.12%, zinc fell 1.39%, lead declined 1%, nickel slipped 0.71%, and tin experienced a steeper decline of 3.14%.

On the SHFE, aluminum decreased 0.4%, zinc dropped 0.29%, lead fell 1.7%, nickel rose 0.63%, and tin declined 1.85%.