Copper Prices Steady Amid Expectations of Increased Demand and Fed Rate Cuts
Copper prices held steady on Thursday, bolstered by anticipation of improved demand from China and a larger-than-expected interest rate cut by the U.S. Federal Reserve in September. The three-month copper contract on the London Metal Exchange (LME) fell slightly by 0.1% to $8,760 per metric ton at 1029 GMT, having dipped earlier to $8,716, just above Monday's 21-week low of $8,714.
After a 5% decline over the past week, copper prices are stabilizing, supported by improving market fundamentals. A trader noted that "the lack of concentrates and domestic scrap will eventually weigh on copper production in China," predicting that this would lead to a drawdown of existing copper stocks over the next two months.
Data released on Wednesday revealed that Chinese imports of copper concentrates, which smelters use to produce copper, fell to a one-year low of 2.165 million tons in July. Meanwhile, production from Chile, the world's leading copper producer, remains sluggish. Additionally, a potential strike at Escondida, the largest copper mine globally, looms as BHP, the operator, seeks government mediation in Chile after failing to reach an agreement with the union.
Supporting copper prices are declining copper stocks in Shanghai Futures Exchange (ShFE) warehouses, which have decreased by 23% since June. This decline reflects renewed interest from Chinese physical buyers as prices have fallen. In contrast, outside China, copper supply remains plentiful, with LME copper inventories nearly tripling in less than three months to 294,750 tons as of Wednesday.
Macroeconomic factors also play a role in copper's market dynamics. Traders have increased their expectations for U.S. Federal Reserve interest rate cuts this year following a weak jobs report last week. A total of 105 basis points of easing is expected by the year's end. Interest rate cuts could weaken the dollar, making metals more affordable for buyers using other currencies.
Investors are closely watching jobless claims data due later on Thursday, as a weaker labor market could strengthen the case for more substantial cuts in borrowing costs.
In other metal markets, LME aluminum declined by 1.1% to $2,261.50 per ton, nickel fell by 1% to $16,140, and lead dropped 0.6% to $1,956. Meanwhile, tin rose by 0.4% to $30,115, and zinc advanced by 1.6% to $2,624.5.
