Base Metals Decline Amid Strong Dollar Following US Inflation Report
On February 14, the prices of most base metals dropped, influenced by a strengthening dollar after the release of U.S. inflation data that exceeded expectations. This development has led to a recalibration of market expectations regarding the timing of potential interest rate cuts by the Federal Reserve.
As of the early trading hours, the price of three-month copper on the London Metal Exchange experienced a decline of 0.8%, settling at $8,195.50 per metric ton. This movement in the metals market is attributed to the U.S. dollar's performance, which approached three-month highs against other major currencies. The robust inflation figures have prompted traders to adjust their forecasts, now anticipating a delayed easing of Federal Reserve rates.
The anticipation of rate cuts was dampened by the U.S. Consumer Price Index (CPI) data, which indicated a significant increase in consumer prices in January, driven by rising costs in housing and healthcare sectors.
Copper's price, pivotal in industries such as power and construction, has seen a reduction of over 4% this month. Concerns over demand from China, especially within its real estate sector, have contributed to this trend. However, market activities have been subdued this week due to the Lunar New Year celebrations in China.
Analysts, including those from ANZ, maintain a positive outlook on copper, citing renewed supply challenges. Recent mine closures have led to a tighter concentrate market, resulting in a decrease in smelter processing fees. Consequently, Chinese smelters are facing financial pressures, prompting delays in new plants, advancement of maintenance schedules, and direct production cuts. These measures could potentially affect refined copper production.
Other metals also witnessed price adjustments; aluminium dropped by 0.6% to $2,212 per ton, while nickel remained stable at $16,270. Zinc and tin saw declines of 0.7% and 1.4%, respectively, whereas lead recorded a modest increase of 0.4%.
