Copper prices held steady near $14,000 a ton after a recent decline, as fresh deliveries of stockpiles to exchange-tracked warehouses signaled an easing of a supply squeeze. This follows a sharp pullback from a record high reached last week, when prices rallied as traders diverted supplies to the US in anticipation of tariffs on refined metal, leaving other regions with limited supply. On Tuesday, futures on the London Metal Exchange were largely unchanged, having closed at their lowest in four weeks.
The easing of the supply squeeze is evidenced by a shift in the market structure, with three-month LME contracts now trading at an $86.75 a ton premium to spot prices, indicating ample near-term availability. This contrasts with earlier periods where concerns over US tariffs on refined copper, ranging from 15% to 30%, led to a rush of metal into US warehouses, accumulating an estimated 675,000 to 700,000 tonnes. The deadline for a US decision on these tariffs is September 30.
Despite the immediate supply relief, copper faces broader macroeconomic headwinds. Hotter-than-expected US inflation data has increased bets on the Federal Reserve hiking interest rates. A stronger US dollar, a common outcome of rate hikes, makes dollar-denominated commodities like copper more expensive for international buyers and can deter investor interest in non-yielding assets. China's August industrial output, while better than expected, showed consumer spending and investment lagging, complicating the country's stimulus choices and potentially impacting future demand.
The recent rally saw copper hit a record high of $14,854 per ton on September 9, capping a 10-week winning streak. However, prices have since retreated, trading near $14,000-$14,002 per ton. The market is currently balancing the unwinding of the "tariff premium" and risks associated with Fed policy against persistent physical market tightness outside the US, where LME inventories were around 234,000 tonnes in early September, significantly lower than US stockpiles. The September 30 tariff decision remains a critical factor that could either reinforce regional shortages or release some of the policy premium, impacting global prices and inventory flows.
