Nonferrous Metal Prices Rise Amid U.S. Rate Cut Hopes, But High Inventories Limit Gains

Prices for most nonferrous metals saw an uptick on Thursday, supported by the potential for a U.S. interest rate cut, though high inventories and disappointing economic data from China curbed the extent of gains.

Three-month copper on the London Metal Exchange (LME) inched up 0.2% to $8,985 per metric ton by 0530 GMT, while the most-traded September copper contract on the Shanghai Futures Exchange (SHFE) also rose 0.2% to 72,320 yuan ($10,108.18) per ton.

The U.S. dollar weakened following data indicating a slowdown in U.S. inflation, fueling speculation that the Federal Reserve might cut interest rates next month. A softer dollar tends to make dollar-denominated metals more affordable for holders of other currencies.

Market participants are also closely monitoring the situation at BHP’s Escondida mine, which produced nearly 5% of the world’s copper last year. The potential strike at the mine has contributed to concerns about tight supply, which had previously driven copper prices to record highs in May.

However, the impact of these factors was dampened by the high levels of LME copper stockpiles, which are at their highest since September 2019. Most of the recent inventory inflows have been into LME warehouses in South Korea and Taiwan, close to China.

"There’s a supply of sellers of copper at between $9,000 and $9,050, and this is in the face of the Escondida strike. High Asia copper inventories are spoiling the mood for the metal to rally," a trader noted.

Adding to the subdued sentiment, official data released on Thursday revealed that China’s factory output growth slowed in July, falling short of expectations. Earlier in the week, data showed that bank lending in China dropped more than anticipated, hitting its lowest level in nearly 15 years. Given that China accounts for about half of global metals consumption, weak economic indicators point to potential softness in metals demand.

Despite these challenges, the disappointing data has also sparked hope for potential Chinese government stimulus measures, which could bolster demand.

Elsewhere in the metals market, LME aluminum rose 0.3% to $2,340 per ton, lead increased 0.8% to $2,025.50 per ton, while zinc edged down 0.2% to $2,710 per ton. Tin and nickel were mostly flat, with tin down 0.1% to $31,385 per ton and nickel holding steady at $16,280 per ton.