Copper Slips on Rising Inventories

Copper futures climbed to around $6.4 per pound on Friday, recovering from three-week lows as rising optimism over a potential US-Iran peace agreement eased concerns about global growth and industrial metals demand. President Donald Trump said a deal could be signed as soon as this weekend in Europe, although there has been no confirmation from Tehran. Meanwhile, stronger-than-expected US inflation data bolstered bets for a Federal Reserve interest rate hike later this year. The outlook for metals demand remains clouded by the prospect of tighter monetary policy, which could slow economic activity and industrial consumption over time. Separately, Jefferies expects copper prices to stay elevated for longer than previously anticipated, citing an average annual supply deficit of 491,000 tons through 2030 and a slower-than-expected recovery at the Grasberg mine.

Copper futures dropped below $6.2 per pound on Thursday, touching their lowest levels in three weeks as heightened uncertainty in the Middle East and growing expectations of central bank interest rate hikes weighed on the outlook for industrial metals. The US and Iran exchanged attacks this week in a major violation of their ceasefire, although the US military later said it had completed its latest strikes on Iran, raising hopes that tensions may ease. Meanwhile, US consumer inflation accelerated in May to its fastest pace in more than three years due to soaring energy costs, though the reading matched market expectations. Traders modestly pared expectations for Federal Reserve rate hikes this year, although a quarter-point increase in December remains fully priced. The prospect of higher borrowing costs continued to cloud the demand outlook for metals, as tighter monetary policy is expected to eventually slow economic activity and industrial consumption.

Copper decreased 2.2% to 6.1641 USD/Lbs