LONDON: Copper prices held firm on Monday as the dollar eased, but gains were capped as fighting between the US and Iran escalated and oil prices jumped, reinforcing fears for growth and inflationary pressures.
Benchmark copper on the London Metal Exchange traded 0.1percent higher at USD13,501 a metric ton in official rings.
A lower US currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand.
Oil prices surged after renewed military strikes between the United States and Iran reignited concerns over energy shipments through the Strait of Hormuz.
Focus was also on falling copper inventories. Copper stocks in LME-approved warehouses have dropped more than 20percent since the end of May to a four-month low of 305,200 tons.
Cancelled warrants or metal earmarked for delivery at nearly 43percent indicate another 130,525 tons is due to leave the LME system. Industry sources say much of this copper is heading for the United States where US President Donald Trump is considering tariffs on the metal used in the power and construction industries.
Traders and producers expecting tariffs on imports have been shipping metal to the United States since President Donald Trump ordered a national security probe in February last year.
Copper stocks in warehouses registered with Comex at record highs of 676,534 short tons or 613,741 metric tons have climbed nearly 600percent since then.
In warehouses monitored by the Shanghai Futures Exchange, copper stocks at 100,271 tons have dropped nearly 80percent since the middle of March. Rapidly falling stocks are creating a higher price floor, a trend seen across most metals as material continues to leave warehouses, said Alastair Munro, senior base metals strategist at broker Marex.
Markets are looking ahead to Kevin Warsh’s debut appearance before Congress as Federal Reserve chair and US inflation data for clues to dollar direction.
Aluminium rose 0.2percent to USD3,145, zinc retreated 1.5percent to USD3,563, lead fell 1.2percent to USD1,874, tin gained 0.1percent to USD53,200 and nickel was down 1percent to USD16,575.