Copper prices fall on US Fed pledge for high rates

LONDON: Copper prices retreated on Wednesday under pressure from a stronger dollar after the Federal Reserve reaffirmed its hawkish outlook.

Federal Reserve Chair Jerome Powell pledged that the US central bank would ratchet interest rates as high as needed to kill a surge in inflation that he said threatened the foundation of the economy.

The comments pushed the dollar higher, which sapped demand for assets priced in the US unit as this made them more expensive to holders of other currencies.

Meanwhile, sentiment remains under pressure from China’s “zero-COVID” strategy which has disrupted a global rebound in production of everything from mobile phones to electric vehicles. Restrictions are scheduled to lift on June 1.

“We are concerned that metal prices have likely peaked in Q1 of this year”, said Julius Baer analyst Carsten Menke.

“The medium to long term Chinese demand will struggle to recover from this lockdown,” he said, adding that the firmer dollar pressured metal prices.

Benchmark three-month copper on the London Metal Exchange (LME) lost 1.7% to $9,204 per tonne by 1633 GMT, snapping a three-session winning streak.

“Metals markets remain in down trends and the rallies this week have been largely of a short covering nature only,” said Alastair Munro at brokerage Marex.

SUPPLY CHAINS: Stress on global supply chains worsened in April as coronavirus lockdown measures in China and the war in Ukraine lengthened delivery times, and air freight costs between the United States and Asia rose, the New York Federal Reserve reported in an update to a worldwide index of supply problems.

INVENTORIES: Total copper stocks in LME-approved warehouses inched up by 2.5% to 180,925 tonnes. About 44% of that is earmarked for delivery and unavailable to the market.

ALUMINIUM: China’s aluminium imports fell 37.7% in April from the same month a year earlier as overseas prices rose and domestic consumption weakened, government data showed on Wednesday.

PRICES: LME aluminium lost 1.6% to $2,845 a tonne, zinc slipped 2.3% to $3,577, lead fell 2.5% to $2,050 and tin dipped 3.2% to $32,950, nickel eased 0.9% to $26,160.