Copper at highest since August as market weighs US Fed cuts, supply

COPPER futures rose to the highest since August, gaining on expectations of quick US interest-rate cuts and a tighter market balance for next year.

Base metals have gained this month on optimism that the US Federal Reserve will start easing monetary policy and soften a major headwind for commodity prices. Stocks in Asia gained on Wednesday (Dec 27) after the S&P 500 neared a record high.

Swap contracts tied to Fed meetings imply a probability of about 85 per cent the US central bank will lower its benchmark rate in March. Traders are pricing in reductions of nearly 160 basis points to 2024 – more than twice as much as Fed officials signalled earlier this month.

Meanwhile, forecasts for chunky growth in copper supply next year were tempered by the Panama government’s decree to close a major mine and Anglo American’s plan to slash production next year.

“The market’s supply-demand balance for next year has changed,” said Ming Gong, a metals analyst at Chinese brokerage Jinrui Futures. “We see disruptions in the availability of copper concentrates, and there’s still not enough scrap for smelters or consumers.”

LME three-month copper futures rose 1.3 per cent on Wednesday to US$8,686 a tonne by 4.10 pm in London, up 3.8 per cent for the year and the highest since Aug 1. The rest of the base metals complex is all in the green, with aluminium reaching US$2,388 per tonne – the highest in intraday trading since Apr 24.

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That comes despite LME stocks of aluminium continuing to rise in the wake of UK sanctions on Russian metal. Data released by the exchange Wednesday showed a 15,075 tonnes inflow into warehouses in South Korea and Taiwan.

Meanwhile, the nickel market is still digesting news that an Indonesian processing facility linked to Chinese metals giant Tsingshan Holding Group has shut down after an explosion killed several workers. Employees staged a protest on Wednesday to demand better conditions. BLOOMBERG