Copper hesitates, held back by wary Chinese buyers, inflation fears

LONDON: Copper prices paused on Wednesday after hitting a six-week peak on the previous day due to shortages outside the US and sliding inventories, as the market was dampened by resistance to higher prices in China and worries about inflation.

Benchmark three-month copper on the London Metal Exchange edged down 0.1percent to USD13,875 a metric ton in official open-outcry trading after hitting its highest in more than six weeks on Tuesday at USD13,934.

“That it stalls ahead of USD14,000 reminds us all that China is not a price chaser, but rather there on dips,” said Alastair Munro, senior base metals strategist at broker Marex.

“The dollar’s rally amid the rising crude price was some sort of overnight headwind with the rates markets also reflective of the resultant inflationary risks.” Oil prices rose over 3percent to near six-week highs as hostilities escalated in the Middle East.

The dollar index advanced during the past four sessions, but was slightly weaker on Wednesday as traders weighed the possibility of Japanese intervention for its weak yen.

A firmer dollar makes commodities priced in the US currency more expensive for buyers using other currencies. The most-traded copper contract on the Shanghai Futures Exchange touched its highest since June 3 at 106,760 yuan on the back of local shortages.

“Traders are still delivering metal to the US, incentivised by the CME-LME import arbitrage ahead of the US decision on whether to impose a tariff on refined copper,” said Craig Lang, principal analyst at CRU. Smelter maintenance and stockpiling due to typhoons are weighing on supply in China, while tight scrap supply is adding to demand for copper cathode, he added. The Yangshan copper premium, a gauge of import demand, hit its highest since November 2022 on Wednesday at USD115 a ton.

Among other metals, LME aluminium gained 0.8percent to USD3,183 a ton, zinc advanced 0.8percent to USD3,582, lead added 0.8percent to USD1,874, nickel rose 0.3percent to USD17,130 and tin was up 0.3percent at USD54,050.