Copper prices edged higher on Friday as a weaker dollar and mounting supply concerns provided support, but the rally remained restrained as elevated oil prices and signs of industrial weakness in China raised fresh questions about demand for the industrial metal.
Benchmark three-month copper on the London Metal Exchange (LME) gained 0.3 percent to $14,289 per metric tonne, although the metal remained 2 percent below its level at the end of the previous week.
“Metals have seen light turnover again so far this session with copper finding some support with a slightly softer dollar, but the broader tone remains cautious,” Neil Welsh, head of metals at broker Britannia Global Markets, said in a note.
He said high energy costs arising from the ongoing US-Iran conflict, alongside signs of industrial weakness in China, had weighed on sentiment across the metals complex.
Despite the cautious tone, copper has retained significant gains over the medium term. LME copper is up 16 percent over the past six months, supported largely by a major redistribution of inventories towards the United States amid expectations of potential tariffs.
The resulting movement of metal into the US has tightened availability in other markets, strengthening the underlying supply argument for copper even as demand expectations remain uncertain.
The squeeze is particularly visible in China, the world’s largest consumer of refined copper.
Inventories monitored by the Shanghai Futures Exchange have fallen 79 percent over the past four months to 38,744 tonnes, their lowest level since January 2024.
The Shanghai Futures Exchange was closed for China’s National Day holiday and is scheduled to reopen on October 8.
Supply risks are also building in the world’s largest copper-producing country, Chile.
Data released on Wednesday showed Chilean copper production fell 12.8 percent year-on-year in August, adding to concerns over constrained global supply.
The outlook was further clouded after supervisors at Escondida, the world’s largest copper mine, rejected a collective contract offer, raising the possibility of industrial action at the operation.
The development adds another potential disruption to a market already dealing with weaker mine output.
“This adds to an overall slump in output, as the industry struggles to maintain aging infrastructure amid difficult operating conditions,” Daniel Hynes, senior commodity strategist at ANZ, said in a note.
Currency movements also offered some support to copper.
The dollar index, which reached its strongest level in 17 months earlier in the week, weakened on Friday. A softer dollar typically supports dollar-denominated commodities by making them relatively cheaper for buyers using other currencies.
That support, however, has been partly offset by the broader energy-cost shock.
Higher oil prices increase production and transportation costs for miners, smelters and manufacturers while potentially weakening industrial demand by squeezing corporate margins and consumer spending.
The result is a market where supply fundamentals remain constructive but the demand outlook is becoming harder to read.
Investors are now looking to US September payrolls data for further clues about the strength of the world’s largest economy and the likely direction of Federal Reserve interest-rate policy.
The data could influence expectations for US borrowing costs and, by extension, the dollar, investment activity and demand for industrial commodities.
A stronger-than-expected labour market could reinforce expectations of tighter monetary policy, while weaker employment data could raise concerns about economic activity and industrial demand.
The competing signals leave copper exposed to sharp shifts in investor sentiment, particularly after its 16 percent six-month advance.
Other LME metals also traded higher on Friday. Aluminium rose 0.5 percent to $3,137 a tonne, zinc gained 0.1 percent to $3,729, lead increased 0.4 percent to $1,864, nickel advanced 0.3 percent to $15,675, while tin edged up 0.3 percent to $54,500.
