Copper hits 3-month lows, focus on demand and US rates

Copper prices plummeted to their lowest levels in over three months on Thursday, as concerns over dwindling demand and potential US interest rate hikes sent the market into turmoil. The benchmark copper price on the London Metal Exchange fell 1.2% to $13,645 per metric ton by 1200 GMT, marking its weakest point since July 29. A stronger US dollar, driven by concerns about inflation, makes dollar-priced metals pricier for international buyers, potentially dampening demand.

This dynamic is a key factor for funds that trade copper based on numerical models and predictive signals. Federal Reserve officials have signaled concern about persistent inflation, leaving the door open for a 50-basis-point rate hike during their December 8-9 meeting. Analyst Tom Price of Panmure Liberum highlighted the softness in overall industrial demand for copper, noting that the decline in technology stock prices has also contributed to the downward pressure on copper prices.

He added that every time there is a setback in artificial intelligence, copper demand and prices tend to suffer. Technically, support for copper is currently around $13,615, the level where the 200-day moving average is located. Aluminium prices have also seen significant volatility, with the premium for the cash aluminium contract over the three-month forward reaching a 36-year high above $175 per ton.

This premium is partly due to historically low stocks in LME-registered warehouses. Aluminium stocks in LME warehouses have dropped nearly 56% since January, while those in Shanghai Futures Exchange warehouses fell 31% last week to 132,605 tons, the lowest level since December. The aluminium price maturity curve on ShFE is also backwardated, with the November contract SAFX6 trading at a 355 yuan premium to the December contract SAFZ6.

Meanwhile, zinc prices fell 0.7% to $3,728 per ton, lead slipped 0.2% to $1,879 per ton, tin remained steady at $46,500 per ton, and nickel gained 0.7% to $16,320 per ton.