Copper and aluminium fall on rate hike expectations

LONDON: Copper and aluminium prices fell on Wednesday as the threat of rising interest rates weakened the outlook for economic growth and held the dollar near 20-year highs.

Data on Tuesday showing higher than expected US inflation cemented expectations for a 75 basis point rate increase from the US Federal Reserve next Wednesday, triggering a sell-off in risky, growth-linked assets that have already plunged in recent months.

It also helped the dollar to deliver its biggest one-day rise since March 2020, making dollar-priced metals costlier for buyers with other currencies and putting pressure on other central banks to raise rates.

That pressure can be seen in China, the world’s biggest metals consumer, where the central bank is expected to pause its monetary easing despite a weakening economy.

“Where’s the growth?” said one London trader, suggesting that metals prices could fall further.

WisdomTree analyst Nitesh Shah said: “If the US is raising rates faster than other countries, that will exert upward dollar pressure and all commodities priced in dollars will take a hit.” While US stock markets and the dollar steadied on Wednesday, benchmark copper on the London Metal Exchange (LME) was down 0.9% at $7,801 a tonne by 1613 GMT.

Aluminium, meanwhile, lost 1.7% to $2,273 a tonne after touching its lowest since April 2021 at $2,227.40.

Both have fallen by about 20% this year.

Adding pressure on aluminium prices was a rise in stocks at LME-registered warehouses to 345,600 tonnes from 276,050 tonnes at the start of September. Though that eases supply concerns, inventories remain far below typical levels. Copper inventories, meanwhile, have been falling in exchange and Chinese bonded warehouses. Tight supply pushed the premium for quickly deliverable cash copper over the three-month LME contract to about $100 a tonne, its highest since November 2021. In other metals, LME zinc was up 0.6% at $3,247 a tonne, nickel fell 0.3% to $24,200, lead gained 0.5% to $1,962.50 and tin was down 0.6% at $21,255.