Copper drops, aluminium gains after Middle East flare-up

LONDON: Copper slipped on Wednesday after fresh hostilities in the Middle East threatened an interim ceasefire deal, reviving worries about economic growth and the supply of metals.

Benchmark three-month copper on the London Metal Exchange shed 1.2% to $13,210 a metric ton by 0950 GMT, having dipped 0.3% in the previous session.

Oil prices surged and global stocks tumbled after U.S. President Donald Trump said the memorandum of understanding signed with Iran to end the Gulf conflict was “over” after the two sides traded attacks.

Brent crude jumped more than 5%, though still traded well below its highs during the Iran war.

“Metals are seeing the initial reaction to higher oil prices and the market is waiting to see whether it escalates or whether it’s just rhetoric once again,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Aluminium wavers as market weighs supply, macros

“The U.S. needs to sort this out because they cannot sustain high oil prices for long and their own reserves are starting to run low.”

During the conflict investors feared that surging oil prices would ignite inflation and curb global economic growth, reducing demandfor metals.

U.S. Comex copper futures slid 2.1% to $6.10 a lb.

LME aluminium added 0.7% to $3,159 a ton on worries around fresh disruption to smelters in the region, which accounts for about 9% of global supply for the metal used in transport, construction and packaging.

The most-traded aluminium contract on the Shanghai Futures Exchange rose 0.7% to 23,075 yuan ($3,394.38) a ton.

Aluminium plunged 16% in June, its biggest monthly decline since the 2008 global financial crisis, after peace talks between the U.S. and Iran prompted traders to price out the war risk premium.

“Looking ahead, copper is likely to remain driven by broader macro sentiment, while aluminium could continue to outperform if geopolitical tensions raise concerns over further supply disruptions,” said Ewa Manthey, commodities strategist at ING.

Among other metals, LME zinc fell 1% to $3,538 a ton and tin lost 0.9% to $52,890, while lead added 0.3% to $1,890 and nickel rose 0.3% to $16,390.