Copper falls as Fed fears knock price rally off course
LONDON — Copper prices fell on Tuesday as investors who had piled in to the market, pushing prices to seven-month highs, grew cautious ahead of an expected U.S. interest rate rise on Wednesday.
Anticipation of a hawkish U.S. Federal Reserve knocked stock markets and has lifted the dollar, making dollar-priced industrial metals costlier for many buyers.
Growth-stifling increases to interest rates are also expected this week from the Bank of England and the European Central Bank.
Benchmark copper on the London Metal Exchange (LME) was down 1.2% at $9,104 a tonne in official open-outcry trading.
The metal used in electrical wiring surged from about $7,500 in November to $9,550.50 on Jan. 18 as the dollar weakened and investors bet that demand in China would revive.
But the rally lost momentum as China closed for the Lunar New Year holiday last week.
“A correction was probably long overdue,” said Saxo Bank analyst Ole Hansen, adding that the trigger was the stronger dollar ahead of the Fed’s policy announcement this week.
An expected recovery in Chinese demand coupled with concern over copper supply mean prices are unlikely to fall too far, Hansen said.
China’s economic activity swung back to growth in January, data showed, and the International Monetary Fund made a slight increase to its 2023 global growth outlook.
On the supply side, protests and blockades could halt production at the large Las Bambas copper mine in Peru. In top copper producer Chile, meanwhile, output fell year on year in December and mine delays are slowing production growth.
In other metals, the head of the Philippines nickel mining industry warned that a government plan to impose an up to 10% tax on nickel ore exports could force local producers to close.
LME aluminum was down 0.6% at $2,573.50 a tonne, with lower premiums for shipments to Japanese buyers reflecting slack demand and high stocks.
Zinc fell 1.9% to $3,381, nickel rose 1.4% to $29,630, lead was down 0.5% at $2,149 and tin slipped 2% to $29,200. (Reporting by Peter Hobson Additional reporting by Mai Nguyen in Hanoi Editing by David Goodman, Kirsten Donovan)
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