LONDON: Copper prices fell to two-week lows on Tuesday as concerns about demand in top consumer China, fueled in part by uncertainty over US tariffs on imports, and a stronger dollar weighed on trust.
Benchmark copper on the London Metal Exchange (LME) fell 0.9% to $8,978 a tonne at 1035 GMT, having earlier hit $8,977 a tonne, its lowest level since December 3.
China’s already lackluster copper demand is expected to come under further pressure if US President-elect Donald Trump makes good on his threat to impose punitive tariffs on imports, which could trigger a trade war and curb the growth.
“There are many unknowns. The most important is what Trump does, particularly in terms of tariffs. The second is what China does in terms of stimulus in response to that,” said Macquarie analyst Alice Fox.
“Our base case is that the copper market will be oversupplied next year. New mining supplies will arrive.”
Macquarie expects mining supplies to rise 5.4% to almost 24 million tonnes next year and a surplus of 300,000 tonnes.
A higher U.S. currency makes dollar-priced metals more expensive for holders of other currencies, reducing demand.
Traders said commodity trading advisors (CTAs) using this ratio in their numerical models had been selling copper.
The dollar is likely to remain firm next year as the market expects the Federal Reserve to cut US rates only very gradually. It is expected to cut interest rates on Wednesday.
Elsewhere, aluminum hit a one-month low of $2,528 a tonne as concerns over surpluses emerged after data showed production in top producer China rose in November. It was last down 1.3% at $2,533.
However, physical aluminum market premiums in the US, paid above the LME price, have increased as the US relies on imports, which would become more expensive with tariffs.
They are around $480 a ton from levels near $420 before the US elections.
In other metals, zinc fell 0.9% to $3,029, lead fell 0.2% to $1,997, tin fell 0.5% to $29,100 and nickel fell 0.8% to $15,580. dollars.
