Copper prices have experienced a decline on the London Metal Exchange (LME), falling by 0.7% to $9,045 per metric ton as of 11:06 GMT. This decrease represents an 18% drop from the record high reached in late May, underscoring the ongoing volatility in the metals market.
The current dip in copper prices reflects a broader trend influenced by increased inventories and weak demand from major consumers.
Copper inventories on the LME have surged, more than doubling to 239,100 tons since early June.
This sharp increase in stockpiles highlights a significant supply surplus. The trend is mirrored on the Shanghai Futures Exchange, where inventories have surged approximately tenfold this year, though they recently retreated to a two-month low of 301,203 tons.
The surplus in copper supplies is exerting downward pressure on prices, contributing to the current market instability.
Despite the recent price drop, copper remains essential for the global energy transition due to its high conductivity and extensive use in electrical cables.
The State Grid Corporation of China, a major copper consumer, has committed a record expenditure of 600 billion yuan this year. This investment underscores copper’s critical role in the shift towards renewable energy and infrastructure development, which may provide long-term support for copper prices.
Central bank policies and copper prices
Market sentiment towards copper and other metals is heavily influenced by central bank policies.
This week, the metals market is keenly watching interest rate discussions from three central banks.
The Federal Reserve is expected to keep rates unchanged on Wednesday, with market expectations shifting towards a potential 25 basis-point cut in September.
This shift is driven by softer US jobs data, cooling inflation, and dovish comments from Fed officials.
Lower borrowing costs could stimulate manufacturing activities and potentially boost metals demand over time.
Union actions in Chile impact prices
Copper prices saw a brief recovery following news that the union at Escondida mine in Chile—the world’s largest copper mine—urged its members to reject a final contract offer from the company, raising the possibility of a strike.
Labour disputes at major mining operations can significantly disrupt supply chains and cause price fluctuations in the global market.
The LME reported mixed performance for other base metals.
Lead prices increased by 0.6% to $2,080 per ton, while zinc saw a slight decline of 0.1%, settling at $2,666.5 per ton.
Tin prices rose by 0.4% to $29,695 per ton, and nickel moved up by 0.4% to $15,860 per ton. Aluminum experienced a drop, falling 1% to $2,265 per ton.
The future trajectory of copper prices and the broader metals market will hinge on inventory levels, demand from key sectors such as energy and manufacturing, and macroeconomic factors including central bank policies and global economic conditions.
While current inventory surpluses and uncertain demand are exerting downward pressure on prices, the ongoing energy transition and potential supply disruptions from labor disputes could provide medium- to long-term support for copper prices.
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