Copper futures declined towards $6.20 per pound on Thursday, approaching fresh four-month lows as a stronger US dollar and rising London Metal Exchange inventories added pressure to the industrial metal.

The dollar strengthened following hotter-than-expected US inflation data and increasingly hawkish signals from Federal Reserve officials, lifting expectations of more aggressive interest-rate increases. This has created an additional headwind for dollar-denominated commodities, making copper more expensive for buyers using other currencies.

Rising LME inventories have also raised concerns about near-term supply availability, with stocks reaching approximately 320,000 tonnes by mid-November, considerably above the August low of 205,000 tonnes.

However, tighter physical supply conditions in China have provided some support. Domestic import premiums have climbed to record levels as Chinese buyers compete for available material, while significant copper volumes have been diverted to the US ahead of potential import tariffs.

Market Snapshot

Current Price Action: Copper Approaches Four-Month Lows

Copper futures moved lower towards $6.20 per pound, extending pressure on the metal as investors responded to the stronger US dollar and increasing exchange inventories.

The latest decline reflects a combination of macroeconomic and physical-market influences. Expectations of more aggressive Federal Reserve tightening have supported the dollar, while rising LME stocks have added to concerns about available supply outside China.

Despite these pressures, the physical market in China remains relatively tight, creating a contrast between rising exchange inventories and strong demand for immediately available material in the world’s largest copper-consuming market.

Strong US Dollar Weighs on Copper Demand

The US dollar has strengthened following hotter-than-expected inflation data and increasingly hawkish comments from Federal Reserve officials.

Markets are increasingly anticipating a faster pace of interest-rate increases, supporting the greenback and putting pressure on commodities priced in US dollars.

A stronger dollar makes copper more expensive for buyers using other currencies, potentially reducing purchasing interest and weighing on international demand.

The changing Federal Reserve outlook therefore remains an important influence on copper prices, particularly while inflation concerns continue to shape expectations for US monetary policy.

LME Inventories Rise Significantly

Rising inventories at the London Metal Exchange have become another important source of pressure.

LME copper stocks reached approximately 320,000 tonnes by mid-November, compared with an August low of 205,000 tonnes.

<text color=”secondary” size=”xs”>LME inventory comparison</text>

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The increase of approximately 115,000 tonnes has raised concerns about the availability of copper in exchange warehouses and added to the bearish pressure on futures.

The inventory trend is particularly important because it contrasts with the tight physical supply conditions reported in China.

China Physical Market Provides Support

Despite the increase in LME inventories, China’s domestic copper market continues to show signs of tighter physical availability.

Import premiums have climbed to record levels in recent weeks, reflecting stronger competition for available copper.

China has also struggled to replenish inventories as significant volumes of copper have been diverted to the United States ahead of potential import tariffs.

This movement of metal towards the US has restricted the availability of material for Chinese buyers, helping support domestic premiums and providing a counterweight to the weakness in international futures prices.

Bullish Sentiment: Factors Supporting Copper

1. Tight Chinese physical supply: Limited availability of copper in China is supporting domestic market conditions.
2. Record import premiums: Higher premiums indicate strong competition for available imported material.
3. Copper diverted to the US: Significant shipments ahead of potential import tariffs have made it more difficult for China to replenish inventories.
4. Physical-market support: The contrast between rising LME stocks and tighter Chinese availability suggests that supply conditions remain uneven across regions.

Bearish Sentiment: Factors Weighing on Copper

1. Stronger US dollar: Rising expectations of more aggressive Federal Reserve tightening are supporting the greenback.
2. Hotter US inflation: October’s inflation data has reinforced expectations of further monetary tightening.
3. Rising LME inventories: Stocks have increased to approximately 320,000 tonnes from August’s low of 205,000 tonnes.
4. Four-month price weakness: Futures are approaching fresh four-month lows, reflecting continued selling pressure.
5. Higher costs for international buyers: Dollar strength makes copper more expensive for purchasers using other currencies.

Price Forecast: What Traders Are Watching

The immediate focus is whether copper can stabilise around $6.20 per pound or whether rising inventories and continued dollar strength lead to further losses.

Traders will be monitoring LME warehouse stocks for evidence that inventory accumulation is continuing. Any further increase could reinforce concerns about near-term supply availability.

Developments in China will also be important. Record import premiums and the difficulty of replenishing domestic inventories suggest that physical demand remains an important source of support.

On the macroeconomic side, further US inflation developments and Federal Reserve commentary could influence the dollar and determine whether additional pressure develops across dollar-denominated commodities.

Market Outlook for the Coming Sessions

Copper faces conflicting forces as the market approaches the end of the week. Rising LME inventories and a stronger US dollar are weighing on futures, while tighter physical availability in China is providing support.

The increase in LME stocks to approximately 320,000 tonnes represents a significant change from August’s low and remains a concern for the near-term outlook. However, record Chinese import premiums highlight the importance of regional supply conditions and the diversion of copper towards the US.

The coming sessions will be shaped by the direction of the US dollar, further inventory developments and China’s ability to secure additional physical supplies.

For now, copper remains under pressure near $6.20 per pound, with the balance between rising exchange stocks and tight Chinese physical availability likely to determine its next move.

Currency Hedger – Contributor

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Disclaimer: This market analysis is provided for informational and educational purposes only and does not constitute investment advice, financial advice or a recommendation to buy or sell any financial instrument. Commodity markets involve risk, and past performance is not indicative of future results.