Copper touches near three-year high as inventories slip and dollar weakens

JOHANNESBURG — Copper rallied to its highest in three years on Tuesday as inventories in London and Shanghai fell and the dollar sank after North Korea raised geopolitical tensions by launching a missile that flew over northern Japan.

Benchmark copper jumped 1.90% to close at $6,791.50 ton. It earlier touched $6,843.50, a level last seen in September 2014.

“The main input to copper is the continued weakness of the dollar which has been particularly aggressive today,” said Ole Hansen, a commodities analyst at Saxo Bank, adding that falling stocks had provided underlying support over the last week.

A weaker greenback generally makes dollar-priced metals cheaper for non-US investors, boosting demand.

North Korea sharply escalated geopolitical tensions with the missile launch that drew a sharp reaction from Japanese Prime Minister Shinzo Abe.

STOCKS DECLINE

Inventories in warehouses registered by both the London and Shanghai exchanges showed declines. On-warrant stocks — those not earmarked for removal — in London Metal Exchange shed 775 tons to 112,175 after fresh cancellations.

Weekly copper stocks in warehouses registered by the Shanghai Futures Exchange declined by 8.20% to 187,444 tons.

Risky assets such as stocks fell while safe-haven gold jumped over 1% as tensions between Washington and Pyongyang grew.

Three-month nickel on the London Metal Exchange ended up 2% at $11,710. At one point the contract rose to $11,885, the highest since Nov. 28, 2016.

The metal largely used to make stainless steel is up 18% this year in London mainly on the back of supply disruptions and higher steel prices.

“Nickel has supply issues that are still playing out and that’s helping, particularly when we see steel prices going up too,” said a commodities trader in Sydney.

Indonesia on Tuesday agreed to let Freeport-McMoRan, Inc. keep operating its giant Grasberg copper mine, after the US company said it would cede control of its Indonesian unit, ending years of wrangling.

US President Donald Trump last month rejected a Chinese proposal to cut steel overcapacity, despite the endorsement of some of his top advisers, the Financial Times said, citing people familiar with the matter.

Among other industrial metals, aluminum ended with gains of 1.20% to $ 2,095, lead ended 2.30% higher at $2,378, tin inched up 0.10% to $20,350, while zinc was 1.50% higher at $ 3,110. —