The decline followed Wednesday’s consumer price report, which showed inflation accelerating in September and reinforced concerns that borrowing costs could remain elevated. A stronger dollar and rising US Treasury yields added pressure to commodities priced in the American currency.
Copper traded around $14,333 a tonne, down approximately 1.1%, as investors reassessed monetary policy expectations. Other base metals faced similar pressure, although individual price movements varied according to supply conditions and demand prospects.
The US Bureau of Labor Statistics reported that consumer prices increased 0.6% in September, compared with 0.4% in August. Annual inflation accelerated to 3.7% from 3.4%, exceeding market expectations and complicating the Federal Reserve’s efforts to contain price pressures.
Underlying inflation also strengthened. The consumer price index excluding food and energy rose 0.3% during September, taking its annual increase to 2.6%, compared with 2.4% in August.
The figures prompted traders to increase bets on additional monetary tightening, reversing some expectations that policymakers could maintain interest rates without further increases.
Market pricing indicated that the probability of an October rate increase had risen substantially following the inflation announcement, although expectations remained divided over whether the Federal Reserve would act immediately or wait until December.
Higher US interest rates generally strengthen the dollar and increase financing costs, making dollar-denominated commodities more expensive for buyers using other currencies. They can also weaken industrial demand by restricting investment, construction activity and manufacturing expansion.
The resulting pressure was particularly significant for copper, which is widely used in electrical equipment, power networks, buildings and industrial machinery. Its sensitivity to global economic conditions makes it vulnerable when investors anticipate tighter financial conditions.
Wednesday’s inflation figures also unsettled broader financial markets. Treasury yields initially climbed as investors adjusted expectations for future interest rates, while equities weakened amid concerns about borrowing costs and corporate profitability.
Energy prices accounted for much of the inflation acceleration. The Bureau of Labor Statistics said gasoline prices increased 9.1% during September, contributing more than half the monthly rise in the headline consumer price index.
The overall energy index advanced 5.2%, while shelter costs increased 0.4%. Food prices were unchanged, reflecting a modest decline in grocery prices alongside higher restaurant costs.
Higher energy costs have also complicated the outlook for industrial metals by raising expenses for mining, processing, transportation and manufacturing. These pressures can restrict production margins even as monetary tightening threatens consumption.
The Federal Reserve’s latest survey of regional economic conditions indicated that businesses were confronting intensifying price pressures, particularly from fuel and transportation expenses. Companies reported challenges in passing higher costs to customers without affecting demand.
The survey also suggested that employment conditions remained relatively stable, although some businesses were limiting recruitment rather than undertaking substantial layoffs.
For copper traders, developments in China added another source of uncertainty. Rising inventories and subdued downstream purchasing following a holiday period contributed to concerns about the immediate strength of physical demand.
China remains the largest consumer of refined copper, making changes in its manufacturing activity, electricity investment and property-related demand particularly important for international prices.
Inventory movements can influence short-term market sentiment because increasing exchange warehouse stocks may indicate that available supplies are exceeding immediate consumption requirements.
However, copper’s underlying supply position remained exposed to operational disruptions. Labour-related uncertainties affecting mining operations in Chile continued to attract attention, limiting confidence that production would expand smoothly.
Chile is the world’s largest copper producer, and interruptions at major mines can affect concentrate availability and refining operations beyond the country.
The combination of monetary pressure and supply uncertainty has produced competing influences on prices. Expectations of weaker demand have encouraged selling, while potential production constraints have provided some resistance to deeper declines.
Market participants were also assessing whether elevated copper prices had discouraged purchases by manufacturers, particularly where companies could postpone orders or draw down existing inventories.
Further US economic indicators, including producer prices and retail sales, were due to provide additional evidence about inflationary pressures and consumer spending.
The Federal Reserve’s next policy decision is scheduled for later in October, with officials weighing persistent inflation against the effects of previous tightening on economic activity and employment.
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