Copper prices rallied on Thursday as the market shrugged off the Federal Reserve’s latest interest rate hike and renewed buying from China helped halt the metal’s recent decline.
Benchmark copper on the London Metal Exchange (LME) climbed as much as 1.6% to nearly US$14,500 ($20,383) per tonne, while Comex copper futures jumped more than 2.2% to US$6.6555 a pound.
The gains came as broader markets rallied following Wednesday’s 25-basis-point rate hike by the US Federal Reserve, its first increase since 2023.
The US dollar also weakened as oil prices extended their decline, making dollar-denominated commodities such as copper cheaper for buyers using other currencies.
Chinese demand strengthens
Chinese buyers have returned to the physical copper market, although volumes are not yet “massive”, according to Marex Group (NASDAQ:MRX) Senior Base Metals Strategist Alastair Munro.
Munro says the activity represents genuine physical demand rather than speculative buying.
Other indicators are also pointing to strengthening Chinese demand.
The Yangshan premium, a closely watched gauge of China’s appetite for imported copper, rose to US$118 a tonne on Wednesday, its highest level since October 2022.
Domestic physical premiums over prices traded on the Shanghai Futures Exchange (ShFE) have also climbed to their highest levels since December 2023.
Meanwhile, copper inventories in ShFE-monitored warehouses have fallen to 54,780 tonnes, their lowest level since January 2024.
The decline partly reflects traders and producers shipping metal to the US in anticipation of potential import tariffs.
Tariff uncertainty
The prospect of US tariffs on refined copper helped drive prices to record highs in both London and New York earlier this month.
However, reports that the US has yet to make a decision on additional tariffs subsequently took some momentum out of the rally.
As uncertainty over the potential tariffs persists, some of the imbalance between US and global copper inventories could begin to unwind.
Analyst Sam Crittenden of RBC Capital Markets, part of Royal Bank of Canada (TSX:RY), outlined the impact in a note cited by Bloomberg.
“Reports of no US copper tariffs unwound some of the physical market speculation,” Crittenden says.
“Despite near-term price weakness, fundamentals remain constructive.”
Still, the Fed has pencilled in another interest rate hike later this year, which could pose a headwind for metals demand across capital-intensive manufacturing and industrial sectors.
Write to Jackson Chen at Mining.com.au
Main Image: CAMAL Ltd.
