Copper Slips Ahead of Fed Rates as Geopolitical Fears Ignite Aluminium Rally amid Supply Worries
Benchmark three-month copper on the London Metal Exchange (LME) saw a pullback on Wednesday, trading in cautious territory ahead of a crucial Federal Reserve interest rate decision. The metal fell 0.4% to $13,631 a metric ton by 10:02 GMT. Despite the decline, copper managed to hold above its 50-day moving average support level at $13,576.The outlook for commodity demand remains under pressure due to global macroeconomic factors. The U.S. dollar has been nearing one-month highs as investors remain reserved awaiting the Fed's eventual decision. Market pricing suggests a roughly 30% probability of the central bank implementing a 25-basis-point hike.
Macroeconomic Headwinds Pressure Copper Demand
A strengthening U.S. currency makes metals priced in dollars more costly for buyers utilizing other currencies. Furthermore, the prospect of higher interest rates weighs on expectations for growth in demand-dependent commodities like copper.Asian markets added further downward pressure to both copper and zinc as worries surrounding valuations in the AI sector extended a selloff across Asian stocks. The Yangshan copper premium, an indicator tracking interest in importing metal into China, stabilized at $112 a ton. This figure marks a reduction from $115 last week, which was the highest level recorded since November 2022.
Middle East Tensions Drive Aluminium and Supply Fears Higher
In contrast to copper's decline, aluminium surged by 0.9% reaching $3,176 a ton. This move occurred as tensions in the Middle East escalated, intensifying concerns regarding metal supplies specifically from the Gulf region. The flare-up of regional conflict also contributed to a sharp rise in oil prices.Available LME aluminium stocks currently stand at a low of 245,350 tons, representing a 16-month nadir. A significant portion of these available stocks is noted as being Russian-made metal, which many traders actively avoid.
Metal Inventory and Other Commodity Movements
The availability of copper stock has recently seen minor increases on the LME. Ninety-seven five tons were put back onto warrant in LME-registered warehouses in Taiwan, leading to available stocks edging up to 101,975 tons.The current cash LME copper contract premium, held at $30 a ton over the three-month forward, shows improvement compared to a discount of $49 seen at the beginning of July. Meanwhile, the outlook for other metals saw mixed performance across the board.
LME zinc eased slightly by 0.1% settling at $3,572. Lead metal experienced a modest rise of 0.8%, trading at $1,909 a ton. Finally, tin and nickel added value, with tin reaching $54,180 and nickel climbing to $17,175.
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