Copper prices declined for a second consecutive session on Tuesday, pressured by a firm U.S. dollar and growing market expectations of a Federal Reserve interest rate increase, raising concerns over potential softening in industrial metals demand. Benchmark three-month copper on the London Metal Exchange fell 0.5% to $13,663.50 a metric ton as of 0910 GMT, having earlier shed as much as 0.8% during morning trading. The contract found technical support near its 50-day moving average, situated around $13,570.
The dollar held near a four-week high on Tuesday, making greenback-denominated metals more expensive for holders of other currencies and contributing to the downward pressure on copper prices. Market attention remained firmly focused on the Federal Reserve's policy meeting scheduled for Wednesday. According to the CME FedWatch tool, 62% of market participants expected the central bank to hold interest rates steady, while 38% anticipated a minimum 25-basis-point hike — a marked shift from just 16% one week prior.
Higher interest rates are widely seen as a threat to economic activity and, by extension, to industrial metals demand. Despite the price weakness, analysts at Sucden Financial expressed a constructive underlying view. The brokerage stated in a report that it expected base metals to remain broadly supported while individual supply stories remained positive, adding that the Fed's decision and key U.S. economic data due later in the week would be critical in determining whether the recent rally could be sustained.
LME copper inventories continued to reflect a tight supply environment. Warehouse stocks fell to 268,775 tonnes, their lowest level since March. The cash-to-three-month spread backwardation stood at $30 per ton after reaching $44.50 — the highest since January — signalling near-term supply tightness in the physical market.
Across the broader base metals complex, aluminum fell 0.5% to $3,151.50 a ton despite an increase in stocks at LME-registered warehouses. Zinc dropped 0.9% to $3,577.50, nickel declined 0.9% to $17,055, tin lost 1.3% to $43,580, and lead was unchanged at $1,890. Separately, analysts at Chinese brokerage Galaxy Futures noted that while easing U.S.-Iran tensions had pulled crude oil prices lower, expectations for further Federal Reserve rate increases had simultaneously risen.
The brokerage cautioned that with markets entering a week of heavy corporate earnings reporting, sentiment was likely to remain fairly cautious. Copper had previously benefited from expectations of structural demand growth tied to artificial intelligence infrastructure buildout, electric vehicles, and broader electrification trends. However, jittery equity markets — led lower by Asian chipmakers amid concerns over AI funding requirements — added to the headwinds for risk-sensitive commodities on Tuesday.
Reporting by Solomon Cefai, with additional reporting and editing by Varun H.K., Mrigank Dhaniwala, and Jan Harvey, as sourced from Reuters via energynews.oedigital.com.
Source: energynews.oedigital.com