Copper prices fell to their lowest levels in two weeks on Tuesday, primarily driven by a stronger dollar and concerns over demand in China, the world’s largest consumer of the metal. The decline was exacerbated by uncertainties surrounding potential U.S. tariffs on imports.
Key Highlights:
Market Performance:
Benchmark copper prices (CMCU3) on the London Metal Exchange (LME) decreased by 0.8%, settling at $8,988 per metric ton at 1709 GMT. Earlier, prices dipped to $8,964, marking the lowest point since December 3.
Demand Concerns:
China’s copper demand, already weak, may face additional pressure if President-elect Donald Trump enacts punitive tariffs on imports, raising fears of a trade war that could hinder economic growth.
Alice Fox, an analyst at Macquarie, noted, “There are a lot of unknowns. The biggest one is what Trump does, particularly in terms of tariffs.”
Supply Outlook:
Macquarie projects that the copper market will be oversupplied next year, anticipating a 5.4% increase in mine supplies, reaching nearly 24 million tons. This could lead to a surplus of 300,000 tons.
Impact of the U.S. Dollar:
A stronger U.S. dollar made dollar-priced metals more expensive for buyers using other currencies, reducing demand. Traders indicated that commodity trading advisors (CTAs) had been selling copper based on this relationship.
Federal Reserve Expectations:
The dollar is expected to remain strong, with the U.S. Federal Reserve likely to implement gradual interest rate cuts starting Wednesday.
Aluminium Market:
Aluminium prices (CMAL3) also faced pressure, hitting a one-month low of $2,526 per ton due to surplus concerns following increased output in China. The price last stood at $2,535, down 1.1%.
Despite the price drop, physical market premiums for aluminium in the U.S. have surged to around $480 per ton, up from $420 before the U.S. election, as the country relies heavily on imports that could become pricier due to tariffs.