Copper rises with Fed rate cut, worries about outflows to US stocks

LONDON: Copper prices rose on Thursday as the U.S. Federal Reserve cut interest rates, while continuing outflows to U.S. copper stocks supported worries about tighter supply in the rest of the world.

The benchmark three-month copper on the London Metal Exchange rose 0.8% to $11,646 per metric ton by 1044 GMT.

Heading for the largest yearly growth since 2009, the metal, used in power and construction, is up 33% so far this year after hitting a record high of $11,771 on Monday due to mine supply disruptions and outflows of copper to the U.S.

“The only reason why copper has been rallying is because of the market perception that there are going to be tariffs on U.S. copper imports announced sometime in the middle of next year to be implemented from early 2027,” said BNP Paribas analyst David Wilson.

That keeps the CME-LME arbitrage open, attracting the metal to the CME stocks, which soared this year. BNP Paribas estimates that there is also over 500,000 tons of copper off the exchange inventory in the U.S.

Meanwhile, visible global exchange inventory is up over 40% year on year. Wilson said, “So, this idea that there’s no copper is misleading, but this draw of copper units into the U.S. is creating a perception of the ex-U.S. tightness.”

Copper demand in top metals consumer China is heading for a decline within single digit percentage points year-on-year in the fourth quarter, he added.

The Fed rate cut by 25 basis points on Wednesday was in line with expectations and already pretty much priced in. However, the yuan currency hit the 14-month high against the dollar after the Fed decision, making dollar-priced metals more attractive for Chinese buyers.

In other LME metals, aluminium rose 0.3% to $2,874.50 a ton, zinc gained 0.7% to $3,102, lead added 0.2% to $1,982.50, tin climbed 0.9% to $40,280, while nickel fell 0.6% to $14,565.