Copper prices fall to six-week lows on jitters over US interest rate hike timing

LONDON — Copper prices slipped to six-week lows on Tuesday on market jitters over the timing of US interest rate rises, dollar direction and strength of demand in top consumer China.

Benchmark copper on the London Metal Exchange (LME) ended down 0.80% at $ 4,710 a ton, from an earlier $4,701.50, its lowest since July 11.

A higher US currency makes dollar- denominated commodities more expensive for non-US firms, a relationship used by funds to generate buy and sell signals for industrial metals.

Markets are looking ahead to the Kansas City Fed’s 2016 Economic Symposium in Jackson Hole from Thursday to Saturday and a speech from Fed Chair Janet Yellen on Friday, which could influence expectations for US monetary policy this year. “People are looking for clues from the Fed, but I would say Jackson Hole is not as important as when Ben Bernanke used the meeting to hint at major changes in policy,” said SP Angel Analyst Sergey Raevskiy.

“Probably the most important thing is economic news from countries like China, which tells us what demand is doing.”

China accounts for about half of global consumption estimated at around 22 million tons this year. Recent data suggested weakness in July and potentially in the second half of the year.

Also undermining copper this week has been rising stocks, which in LME approved warehouses have risen nearly 30,000 tons to 240,075 tons since Aug. 17. But this may not be the start of an upward trend, analysts say.

According to the International Copper Study Group (ICSG), in its latest monthly bulletin, the copper market saw a deficit of 222,000 tons in the first five months of the year.

ICSG said the deficit in May narrowed to 65,000 tons from a shortfall of 144,000 tons in April.

“While the monthly deficit has reduced it is still a deficit and we expect an ongoing gradual erosion of inventories, providing price support into 2017 and beyond,” Investec analysts said in a note.

Zinc rose 1% to $2,302. Worrying the market is a large LME position, holding 40%- 49% of zinc warrants and cash contracts. This, traders say, is behind the premium, of around $2 a ton, for the cash contract over the threemonth future for the first time since late May.

Aluminum rose 0.10% to $1,669, lead gained 0.40% to $1,861, tin added 0.90% to $18,700 and nickel was flat at $10,260. —