Copper is heading for its biggest weekly loss in nearly six months as concerns over Chinese demand and elevated energy costs outweigh tightening global supply.
Benchmark three-month copper on the London Metal Exchange traded around US$14,300 ($20,586) a tonne on Friday, leaving the metal down about 2% since the end of last week.
The red-coloured metal has come under pressure in recent sessions as signs of weakness in China’s industrial sector weigh on the demand outlook.
Rising energy costs stemming from the ongoing Middle East conflict have added to the pressure, while the US dollar reached a 17-month high earlier this week.
A stronger dollar makes dollar-denominated commodities more expensive for buyers using other currencies.
“Metals have seen light turnover again so far this session with copper finding some support with a slightly softer dollar, but the broader tone remains cautious,” Britannia Global Markets Head of Metals Neil Welsh says in a note.
“High energy costs stemming from the ongoing US-Iran conflict and signs of industrial weakness in China have weighed on sentiment across the complex.”
Supply concerns offer support
Despite the weaker week, copper continues to trade at historically elevated levels as concerns over tightening supply provide support.
Chile, the world’s largest copper producer, recorded a 12.8% year-on-year decline in production during August, its lowest monthly output in more than 15 years.
Further disruptions are also threatening some of the country’s biggest operations.
Supervisors at BHP‘s (ASX:BHP) Escondida mine, the world’s largest copper mine, have rejected a collective contract offer, raising the prospect of a strike.
The Radomiro Tomic operation of Codelco also suspended activities following a fatal accident on Thursday, while Antofagasta‘s (LSE:ANTO) Centinela mine has faced separate labour tensions.
The disruptions are adding to longer-term challenges for Chile’s copper industry, including ageing infrastructure and declining production.
“This adds to an overall slump in output, as the industry struggles to maintain aging infrastructure amid difficult operating conditions,” ANZ Senior Commodity Strategist Daniel Hynes told Reuters earlier.
Inventories tighten
Tightening inventories are also providing support to copper prices.
LME copper has gained around 16% over the past six months, largely as inventories shifted towards the US amid expectations of potential tariffs, creating tighter supplies elsewhere.
Stocks held in warehouses monitored by the Shanghai Futures Exchange (SHFE) have fallen 79% over the past four months to 38,744 tonnes, their lowest level since January 2024.
The SHFE is currently closed for China’s National Day holiday and is scheduled to reopen on 8 October.
Write to Jackson Chen at Mining.com.au
Main Image: Codelco
