LME copper rises on rate cut expectations and supply growth

• LME copper surged to $10,000/ton on US rate cut hopes; inventories rose, easing supply pressures.
  
  
• Market optimism on Fed action boosted copper demand despite speculative futures.
  
  
• Concerns over China's recovery persist; rising copper stocks reflect market adjustments amid global uncertainty.
  
  

In July, copper prices on the London Metal Exchange (LME) rose sharply after expectations grew that the United States would lower interest rates sooner than expected. This led to a more than 3% increase in copper futures prices within a week, reaching $10,000 per ton on July 5th, the highest level seen since mid-June. This surge was driven by investor optimism and reactions to potential shifts in US monetary policy.

Market Dynamics Amid Fed Rate Cut Expectations and Economic Indicators

The Increase in copper prices signals confidence among investors that the US Federal Reserve might take action to stimulate the economy. This anticipation of a rate cut boosted demand for commodities like copper, which tends to benefit from lower interest rates. The market reaction underscores the sensitivity of metals prices to macroeconomic signals, particularly those related to central bank policies and economic growth prospects.

Weak U.S. economic signals, like a disappointing jobs report, have raised expectations for a possible interest rate cut by the end of the year. This has aligned with a dollar decline against major currencies, making dollar-denominated goods more attractive and driving up buying. Despite futures prices hitting significant highs, the market's upward path remains speculative and uncertain.

Meanwhile, there are ongoing concerns about China's economic recovery, a crucial market for global consumption. These worries are amplified by a troubling Manufacturing Purchasing Managers' Index (PMI) for June, adding to cautious sentiment across global markets.

Rising LME Copper Inventories: Shifting Market Dynamics

In recent weeks, inventories of LME copper have steadily climbed, hinting at a potential relief in supply-demand pressures. This uptrend indicates a notable increase in production, reaching approximately 192,000 tons, which marks a substantial 60% rise m-o-m.

The rise in copper stocks suggests a shift in market dynamics, potentially easing concerns about supply shortages. This trend underscores ongoing adjustments in the global copper market, influenced by factors such as production levels and demand fluctuations.

As of August 8, electrolytic copper is priced at JPY 1.62 million/t ($10,063/t), a crucial marker for domestic copper rates. With the yen exchange rate around 1 dollar = 161 JPY stable, prices are expected to stay high briefly, barring unexpected currency swings.

This article has been published under an agreement between BigMint and Japan Metal Daily.