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| Copper |
Copper prices extended their decline on Tuesday, driven by ongoing uncertainty surrounding U.S. Federal Reserve policies and a relief in global supply disruptions. Prices dropped by as much as 2.4%, reflecting a broader downturn in base metal markets. By 1 p.m. ET, copper was trading at approximately $10,855 per tonne on the London Metal Exchange, with COMEX prices at around $11,050 per tonne.
Fed Policy Uncertainty Pressures Copper Prices
The primary driver behind copper’s recent decline is the shifting stance of the U.S. Federal Reserve on interest rates. Earlier, comments from various Fed officials indicated conflicting views on the future of monetary policy. While Chairman Jerome Powell emphasized that a rate cut in December is not guaranteed, Chicago Fed President Austan Goolsbee expressed concern about rising inflation rather than the job market.
This uncertainty over U.S. interest rates has strengthened the U.S. dollar, reaching its highest level since May. A stronger dollar typically exerts downward pressure on commodities like copper, making them more expensive for holders of other currencies. This dynamic is contributing to the recent cooling of copper prices, after they surged in anticipation of trade progress between the U.S. and China.
Codelco's Supply Outlook Eases Concerns
On the supply side, recent news from Chile’s state-owned copper miner, Codelco, has added a sense of relief to the market. Codelco reported that output at its El Teniente mine, which had faced disruptions earlier in the year, is expected to recover and even increase in the coming years. This forecast has eased some of the supply fears that were pushing copper prices to all-time highs.
Despite the setbacks earlier in the year, including the mine collapse at Codelco’s El Teniente, analysts do not foresee a significant copper shortage in the market. According to Carsten Menke, head of next-generation research at Julius Baer Group, the supply disruptions, though notable, are not large enough to create a copper deficit. Additionally, the easing of trade tensions between the U.S. and China is unlikely to spur a dramatic increase in copper demand.
Market Outlook and Price Trends
Looking ahead, the copper market remains in a delicate balance. The global trade environment is improving, but the outlook for copper demand remains muted, especially with the uncertainty surrounding China’s economy. On the supply side, while Codelco’s recovery is positive, other disruptions may continue to pose risks. Overall, copper prices are likely to remain volatile as market participants weigh the effects of U.S. monetary policy and global economic developments.
ScrapInsight Commentary
The copper market is experiencing a temporary dip due to shifting U.S. Federal Reserve policies and easing global supply concerns. Although supply disruptions have impacted copper prices in the past, the latest forecasts suggest that the market will remain balanced. With trade tensions easing, the next few months could see a stabilization in copper prices, but ongoing global economic uncertainty remains a key factor to monitor.
