Copper futures surged to their highest levels since August, driven by the anticipation of swift interest-rate cuts by the US Federal Reserve and concerns about a tightening market balance in the coming year. This positive momentum for base metals is fueled by optimism that the Federal Reserve will initiate monetary policy easing, alleviating a significant headwind for commodity prices. Asian stocks experienced gains on Wednesday, following the S&P 500’s proximity to a record high.
Market sentiment, reflected in swap contracts tied to Fed meetings, indicates an 85% probability that the US central bank will lower its benchmark rate in March. Traders are pricing in rate reductions of nearly 160 basis points through 2024, surpassing the expectations signaled by Fed officials earlier in the month.
Simultaneously, projections for substantial growth in copper supply for the next year were tempered by the Panama government’s decision to close a major mine and Anglo American Plc’s announcement of production cuts in the upcoming year.
Ming Gong, a metals analyst at Chinese brokerage Jinrui Futures, noted, “The market’s supply-demand balance for next year has changed,” citing disruptions in the availability of copper concentrates and insufficient scrap for smelters or consumers.
LME three-month copper futures experienced a 1.3% increase on Wednesday, reaching $8,686 a ton by 4:10 p.m. in London. This marks a 3.8% gain for the year and the highest level since August 1. The broader base metals complex also demonstrated positive performance, with aluminum reaching $2,388 per ton—its highest intraday trading value since April 24.
Interestingly, the surge in aluminum prices occurred despite a continuous rise in LME aluminum stocks following UK sanctions on Russian metal. Data released by the exchange on Wednesday revealed a 15,075-ton inflow into warehouses in South Korea and Taiwan.
In the nickel market, ongoing concerns surfaced following news of the closure of an Indonesian processing facility linked to Chinese metals giant Tsingshan Holding Group, following an explosion that claimed several workers’ lives. Employees staged a protest on Wednesday, demanding better working conditions.
