Copper falls as dollar rally weighs on industrial metals

SINGAPORE: Copper prices receded slightly on Wednesday, weighed by rising oil prices and gains in the US dollar. Benchmark three-month copper on the London Metal Exchange was down 0.25% at $14,379 a metric ton by 0300 GMT.

The dollar index, which measures it against a basket of currencies, rose 0.14% to 102.05.

A stronger dollar can weigh on industrial metals by making them more expensive for buyers using other currencies.

Copper was also pressured by higher oil prices, which rose as the market weighed supply constraints from a storm heading for US oil-producing regions and attacks by Yemen’s Houthis on Saudi Arabia.

Rising oil prices have stoked inflationary pressures and concerns that policymakers would be forced to hike interest rates.

Higher interest rates can weigh on demand for growth-dependent commodities like copper by dampening economic activity.

Meanwhile, Asian stock softened on Wednesday, led by declines in AI-related stocks, paring gains from a rally earlier in the week that had supported copper prices.

Growth in the AI and defence sectors will boost copper demand by 50% by 2040, consultancy S&P Global has said.

Later on Wednesday, the market will look to the Federal Reserve’s release of minutes of its September policy meeting for signs of potential further rate hikes.

Aluminium, which increased 0.25%, was the main bright spot in the LME industrial metals complex.

It was boosted by supply risks tied to the heightened Middle East tensions.

Still, prices for the metal used in construction, packaging and transport have fallen by more than 17% since hitting a four-year high in June, weighed by easing worries about supply from the Gulf region and expectations of new production capacity in Indonesia.

Among other LME metals, zinc dipped 0.23%, lead dipped 0.13%, nickel ticked 0.11% higher and tin dipped 0.09%.

The Shanghai Futures Exchange was closed, and will reopen when the country returns from holiday on Thursday.