Copper Falls as Strong Dollar Weighs

Copper futures declined toward $6.20 per pound on Thursday, approaching fresh four-month lows as the US dollar strengthened amid growing expectations of more aggressive Federal Reserve rate hikes following hotter-than-expected inflation data. Increasingly hawkish signals from Fed officials further supported the greenback, putting additional pressure on dollar-denominated commodities such as copper by making them more expensive for buyers using other currencies. Prices also came under pressure from rising inventories at the London Metal Exchange, which reached approximately 320,000 tons by mid-November, up considerably from August’s low of 205,000 tons. However, tighter physical supply in China provided some support, with domestic import premiums climbing to record levels in recent weeks. China has also struggled to replenish its inventories as significant volumes of copper have been diverted to the US ahead of potential import tariffs.

Copper futures climbed toward $6.30 per pound on Wednesday, recovering from four-month lows amid tightening physical supply in China, the world’s largest copper consumer. Import premiums in the country have reached record levels in recent weeks, while refined copper shipments have declined this year and domestic smelters have reduced production due to rising ore costs and weaker profit margins. China has also faced difficulties replenishing its inventories as substantial volumes of copper have been redirected to the US ahead of potential import tariffs. Additional support came from renewed investor interest in the artificial intelligence sector following strong earnings from neocloud provider CoreWeave. Copper benefits directly from the global expansion of AI infrastructure due to its essential role in data centers and power networks. However, a Democratic sweep in the US midterm elections threatened tighter AI regulations and slower data center development.

Copper fell to $6.20 per pound in November, the lowest in four months, tracking base metals with exposure to data centers and electrification projects as markets reconsidered the magnitude of demand growth for the sector's infrastructure buildout. Prices erased their momentary rebound as hotter-than-expected inflation in the US drove markets to price in multiple Federal Reserve rate hikes in the coming quarters, lifting the dollar and borrowing costs for debt-ridden AI infrastructure companies. The data compounded recent pressure from the Democratic Party assuming a majority in the US Congress, which is associated with policies that may slow investment in infrastructure projects that require large amounts of copper. A Democratic Congress also reduced bids for copper futures in the US as tariffs on the metal threatened by President-elect Trump became less likely to be implemented.