Copper dips as rate hike bets weigh on demand hopes

SINGAPORE: Copper prices edged lower on Tuesday, weighed by lingering bets of a US interest rate hike threatened to dampen demand, even as crude oil prices declined as investors assessed a pause in US strikes on Iran.

Benchmark three-month copper on the London Metal Exchange was down 0.5% at $13,664 a metric ton by 0300 GMT.

The most-traded copper contract on the Shanghai Futures Exchange dipped 0.14% at 104,800 yuan ($15,484.86) a ton.

The market is awaiting the outcome of the US Federal Reserve meeting, due on Wednesday, and weighing the impact of relief to oil prices after a lull in fighting between the US and Iran.

“Easing tensions between the United States and Iran have pushed crude oil prices lower, but expectations of further Federal Reserve rate hikes have risen,” analysts from Chinese broker Galaxy Futures, said.

Expectations that the Fed will hold interest rates steady stand at 62%, while 38% of market participants expect at least a 25 basis points hike, up from 16% a week earlier, according to CME FedWatch.

The copper market is worried that higher rates could weigh on demand by dampening economic activity.

The red metal has benefited from expectations of rising demand from AI infrastructure, electrification and electric vehicles. Jittery stock markets also weighed on trader-risk appetites.

Chipmakers led Asian shares down on Tuesday on unease about the funding demands of the AI boom.

“With the market entering a heavy earnings-reporting week, sentiment remains relatively cautious,” the Galaxy Futures analysts said.

Aluminium was down by 0.35% on the LME and stable on the SHFE.

Stocks have been battered by disrupted supply from the Middle East, and total stocks in LME-registered warehouses fell to their lowest on record since 1998.

Among other LME metals, zinc lost 0.43%, lead added 0.21%, nickel dipped 0.16% and tin dropped 1.71%.

Elsewhere on SHFE, zinc lost 0.5%, lead added 0.35%, nickel lost 0.77% and tin dropped 1.5%.