Onome Amuge
Copper prices edged lower on Tuesday, reversing some of their earlier gains after data from the London Metal Exchange (LME) showed an increase in inventories. The price drop was mitigated, however, by expectations of a US interest rate cut and concerns over potential supply disruptions from Chile.
Benchmark copper on the LME traded down 0.5 per cent at $9,642 per metric ton in official rings, having earlier reached a session high of $9,747.5. The key driver of the day’s decline was an increase of 14,275 tonnes in LME-registered warehouses, bringing the total to 153,850 tonnes, a 70 per cent jump since late June.
Traders believe the new copper supply to the LME warehouses likely originated from China, the world’s largest consumer of the metal. Despite accounting for over half of global consumption, which is estimated at around 26 million tonnes this year, Chinese buyers have been cautious. Marcus Garvey, an analyst at Macquarie, noted that Chinese buyers have been operating on a “hand to mouth” basis, avoiding stockpiling. He added that LME prices will find a floor when Chinese buyers resume purchasing.
The market is also closely monitoring the situation at Codelco’s El Teniente copper mine in Chile, where operations were halted following an earthquake. Last year, the mine produced 356,000 tonnes of copper. The market impact of the stoppage will depend on its duration, which remains uncertain.
In the US, unexpectedly weak jobs data has boosted bets on a Federal Reserve interest rate cut as early as September. This has weakened the US dollar, making dollar-priced commodities like copper more affordable for holders of other currencies and helping to cap price losses. Technical resistance for copper is currently strong around the $9,730 level, where the 21- and 50-day moving averages converge.
In other metals markets, aluminium climbed 0.5 per cent to $2,566 a tonne, while zinc added 0.6 per cent to $2,767. Lead was up 0.3 per cent at $1,964. Tin retreated 0.1 per cent to $33,185, and nickel fell 0.8 per cent to $14,950.
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