Copper on track for weekly loss due to strong dollar, high inventories

  • Copper rises after worst day since Aug. 1 on Thursday
  • Dollar on track for 10th straight weekly rise
  • Nickel up after hitting lowest price since July 2022

Copper prices were on track for a weekly loss on Friday due to a strong dollar, high inventories and reduced risk appetite after the U.S. Federal Reserve signalled monetary policy would remain restrictive for longer.

Three-month copper on the London Metal Exchange (LME) HG1! was up 0.3% at $8,219 per metric ton at 1617 GMT. Its 1.8% drop on Thursday was the deepest daily decline since Aug. 1.

The U.S. dollar currency index was on track for its 10th consecutive weekly increase in the wake of the Fed decision, making dollar-priced metals less attractive to holders of other currencies.

“With rates this high now, investors face a dilemma – do they continue to hold no-yielding metal exposure, or switch to some other asset that offers rising returns,” said Tom Price, head of commodities at Liberum.

Adding to the pressure on prices for copper, which is used in the power and construction sectors, inventories in LME-registered warehouses (MCUSTX-TOTAL) remained at their highest level since May 2022, and data by the ICSG showed that the copper market was in surplus in the January-July period.

The discount for near-term delivery versus the LME three-month copper contract (CMCU0-3) was at a four-month high, indicating plentiful immediate supply.

In the longer term, the copper market should find support from demand from the green energy transition and economic stimulus in China, the world’s top metals consumer, said Nitesh Shah, commodity strategist at WisdomTree.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 16.9% this week, according to the exchange.

Meanwhile, LME aluminium ALI1! rose 1.3% to $2,240.5 per ton. LME’s on-warrant stocks fell to a one-month low after new cancellations in three different locations, including South Korea’s Gwangyang port, daily data showed. (MALSTX-TOTAL), (0#MALSTX-LOC-GRD)

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