Copper hits record on supply worries ahead of Fed decision

LONDON: Copper prices hit record highs on Monday as a lower dollar ahead of the U.S. Federal Reserve’s meeting later this week triggered a flurry of buying, while concerns about future shortages reinforced positive sentiment.

Benchmark copper on the London Metal Exchange was up 0.3% at $11,657 a metric ton at 1057 GMT from an earlier peak at $11,771 a ton, a gain of more than 30% this year.

Expectations are for the U.S. central bank to cut rates. This will weigh on the U.S. currency, which, when it falls, makes dollar-priced metals cheaper for holders of other currencies – a relationship used by funds to generate buy and sell signals from numerical models.

Expectations of deficits are partly due to mine supply disruptions in recent years, including an accident at Freeport McMoRan giant Grasbery mine in Indonesia.

Supplies have also tightened in the rest of the world as traders have been shipping copper to the United States since March due to higher prices on Comex ahead of U.S. President Donald Trump’s planned import tariffs.

Refined copper was ultimately given an exemption from the 50% import tariffs that came into force on August 1, but U.S. levies on the metal used in the power and construction industries remain under review, with an update due by June.

Copper inventories in the Comex approved warehouses a record high at 436,853 short tons or 396,306 metric tons on Friday, are up more than 300% since March.

Analysts at Macquarie estimate there is roughly another 335,000 tons sitting off-exchange in the U.S.

“This is lower than our prior estimate of ~420kt due to more metal having transferred to Comex warehouses and November imports being lower than the usual pre-Section 232 level,” Macquarie said.

“Allowing for some of this to be the transfer of existing stocks, it points towards a market surplus of 400,000 (to) 600,000 tons year to date. The issue is that most of this is in the U.S., creating an artificial tightness elsewhere.”

In other metals, aluminium slipped 0.1% to $2,895 a ton, zinc gained 0.4% to $3,110, lead added 0.4% to $2,011, tin firmed 0.3% to $40,175 and nickel eased 0.1% to $14,930.