Copper prices fell to a one-week low on Friday as a stronger U.S. dollar and renewed inflation concerns triggered by upbeat American labour market data pushed traders to price in a higher likelihood of Federal Reserve interest rate hikes later this year.
Benchmark three-month copper on the London Metal Exchange (LME) dropped 3.1 percent to $13,502.50 per metric tonne, marking its lowest level since May 28 and breaking below its 21-day moving average support level. The most actively traded COMEX July copper contract also weakened sharply, falling 3.9 percent during the session.
Copper, a key industrial metal used in power generation, construction, electronics, and manufacturing, remains up about 9 percent year-to-date and earlier this year touched a record high of $14,527.50 per tonne in January. Despite the recent correction, analysts continue to point to a structurally tight long-term outlook, with some investment banks upgrading their price forecasts this week. Citi, for instance, has projected copper could reach $15,000 per tonne within the next six to twelve months.
However, near-term sentiment has shifted decisively in response to macroeconomic headwinds.
The catalyst for Friday’s decline was the latest U.S. nonfarm payrolls report, which showed the addition of 172,000 jobs, significantly above market expectations. The data reinforced the view that the U.S. economy remains resilient and reduced expectations of near-term monetary easing by the Federal Reserve.
Instead, markets have increasingly begun to price in the possibility of renewed rate hikes later in the year, a shift that has strengthened the U.S. dollar and driven Treasury yields higher.
For commodities such as copper, which are priced in dollars, a stronger currency typically translates into reduced purchasing power for international buyers, dampening demand and weighing on prices.
The repricing in interest rate expectations has also triggered broader financial tightening conditions, reducing liquidity across risk assets and reinforcing downward pressure on industrial metals.
Adding to bearish sentiment, indicators of Chinese demand have softened in recent weeks, raising concerns about consumption trends in the world’s largest copper market.
The Yangshan copper premium, a key gauge of Chinese appetite for imported copper, fell 9 percent this week to a five-week low of $64 per tonne.
“High prices will inevitably test demand elasticity, particularly in China where buyers have historically shown sensitivity to elevated prices,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Despite the recent price weakness, underlying supply dynamics remain relatively tight in certain regions, supported by shifting inventory flows linked to potential U.S. trade policy developments.
A premium between COMEX copper contracts and LME benchmarks has encouraged inflows into U.S.-based warehouses ahead of a pending recommendation from the U.S. Department of Commerce on possible import tariffs, expected by the end of June.
As a result, COMEX copper stocks have risen sharply, reaching a record 583,055 tonnes, as traders position for potential trade-related disruptions.
In contrast, visible inventories outside the United States have tightened.
LME-registered warehouse stocks fell to 240,050 tonnes, the lowest level since February 24, while cancelled warrants, metal earmarked for withdrawal, now account for 37 percent of total inventories.
In Shanghai, copper inventories tracked by the Shanghai Futures Exchange declined by 4 percent this week to 169,512 tonnes, the lowest level since late December.
The weakness in copper was mirrored across the wider base metals complex, reflecting a broad-based selloff in industrial commodities.
On the LME, aluminium fell 1.8 percent to $3,598.50 per tonne, zinc declined 1.8 percent to $3,523, and lead eased 0.7 percent to $2,002.50. Tin recorded the heaviest loss, sliding 5.9 percent to $52,385 per ton, while nickel fell 0.9 percent to $18,515.
Nickel prices touched their lowest level since May 19, while aluminium and tin both hit their weakest levels since May 20. Lead also traded at a one-week low.
