Copper slips on concerns over AI demand, high US inventories

LONDON: Copper prices eased on Thursday after touching a two-week high in the previous session as investors stayed on the sidelines, wary about demand from the AI sector and high US inventories.

Three-month copper on the London Metal Exchange was down 0.9 percent at USD14,345 a metric ton in official open-outcry trading, after hitting its highest since October 14 on Wednesday. “Sentiment has turned relatively more cautious rather than outright bearish,” JP Morgan analyst Patrick Jones said in a note.

One of the drivers that sent copper to a record peak of USD14,875 in September was bullishness that the frenzy to build AI data centres would boost copper demand.

Shares in Google parent Alphabet tumbled in after-hours trading on Wednesday after reporting a massive acceleration in cash burn as it poured resources into building out AI.

Another catalyst for gains in copper, widely used in construction and power, has been huge flows of metal to the US in anticipation that tariffs would be imposed, creating shortages elsewhere.

Inventories in warehouses linked to the US Comex exchange have surged 60 percent so far this year to 800,321 short tons or 726,039 metric tons.

“They (investors) see the main downside risk as US tariff inaction reducing the US import pull and gradually giving pricing power back to Chinese consumers,” Jones said. The most-traded copper contract on the Shanghai Futures Exchange slipped 0.4 percent to close at 109,380 yuan (USD16,408.64) a ton.

Supply remained tight in China, reflected in surging copper premiums. The Yangshan copper premium, a gauge of Chinese consumers’ appetite for imported units, surged to USD205 a ton on Wednesday, its highest in more than a decade.

LME zinc extended gains on supply fears, rising 0.4 percent to USD3,879 a ton, after touching its highest in more than a month at USD3,899.50.

Among other metals, LME aluminium fell 0.4 percent to USD3,062 a ton, nickel lost 0.5 percent to USD15,520 and tin shed 0.5 percent to USD50,450, while lead rose 0.5 percent to USD1,907.