Copper prices are on the rise, with futures reaching around $5.98 per pound and nearly $6.20 a pound in recent trading sessions, driven by a weaker US dollar and reduced expectations of immediate Federal Reserve tightening. The probability of a Fed rate hike in September has fallen significantly, from approximately 67% to around 50%, following a weaker-than-expected US jobs report. This shift has made dollar-denominated assets, including industrial metals, more attractive to investors holding other currencies.
Aluminum futures on the London Metal Exchange have recovered above $3,100 per ton after experiencing their steepest monthly loss since 2008, plummeting over 15% in June. This significant drop was initially due to optimism surrounding a US-Iran peace deal and the reopening of the Strait of Hormuz, which accounts for nearly 10% of global aluminum output. However, recent positive signals from the Fed and a weaker dollar have contributed to a price recovery.
While demand prospects have improved due to expanding manufacturing activity in China, a major consumer of metals, concerns about oversupply persist. Increased aluminum production in China and expanding smelting capacity in Indonesia could limit future price gains. Analysts suggest that the short-term trajectory of the metals market will continue to depend on Fed policy expectations and China's demand recovery, but improved global supply could create significant headwinds for copper and aluminum prices in the coming months.
