Copper slides towards third weekly fall

Copper prices edged higher on Friday but remained on course for a third consecutive weekly decline, as a firmer US dollar and persistent concerns over global demand continued to weigh on sentiment across industrial metals markets.

Benchmark three-month copper on the London Metal Exchange climbed during morning trade, recovering from earlier losses as short-covering set in ahead of the weekend. Despite the rebound, prices have retreated over the week, pressured by currency movements and cautious positioning by investors assessing the outlook for manufacturing activity in major economies.

The US dollar index has strengthened against a basket of major currencies, reflecting expectations that the Federal Reserve will keep interest rates elevated for longer amid resilient economic data. A stronger dollar typically makes metals priced in the greenback more expensive for holders of other currencies, curbing demand from overseas buyers and dampening speculative inflows into commodities.

Traders said the currency effect had amplified underlying concerns about industrial consumption, particularly in China, which accounts for more than half of global copper demand. Although Beijing has unveiled targeted measures to support the property sector and bolster infrastructure spending, analysts note that the recovery in construction and manufacturing has been uneven.

Data from China’s National Bureau of Statistics have shown mixed signals in factory output and fixed-asset investment, while property investment remains subdued compared with previous cycles. Market participants are watching for additional fiscal stimulus and credit easing to stabilise activity in sectors that are intensive consumers of refined copper.

In the United States, economic indicators have painted a more resilient picture, with labour market strength and consumer spending holding up despite tighter monetary policy. However, higher borrowing costs have slowed segments such as housing and business investment, tempering expectations for a strong upswing in metals demand.

Supply dynamics have provided intermittent support to prices this year. Disruptions at several large mining operations in Latin America have tightened concentrate availability, contributing to lower treatment and refining charges. Producers in Chile and Peru, the world’s two largest copper suppliers, have grappled with operational setbacks ranging from lower ore grades to regulatory and labour issues.

Industry data show that global mine output growth has lagged earlier projections, even as major miners including BHP and Freeport-McMoRan maintain expansion plans. Executives have repeatedly highlighted structural challenges such as declining ore quality, permitting delays and rising capital costs, which could constrain medium-term supply.

Inventories held in LME-registered warehouses have fluctuated, reflecting shifting trade flows and speculative positioning. While stocks are not at historically tight levels, analysts caution that visible inventories capture only part of the supply picture, as off-exchange holdings and bonded warehouse material can alter the apparent balance.

Against this backdrop, fund managers have trimmed bullish bets on copper futures, according to positioning data from US markets. The reduction in net long positions suggests a more cautious stance, with investors awaiting clearer signals on global growth, central bank policy and Chinese stimulus measures.

Broader commodity markets have mirrored the mixed tone. Aluminium and zinc have also faced pressure from currency strength and demand uncertainties, while iron ore has reacted to developments in the steel sector. Oil prices, by contrast, have drawn support from supply management by major producers, underscoring the divergence between energy and base metals fundamentals.

Analysts at several international banks have argued that the longer-term case for copper remains intact, citing the metal’s central role in electrification, renewable energy systems and electric vehicles. The transition to lower-carbon energy sources is expected to increase demand for copper-intensive infrastructure, from power grids to battery storage.

However, they acknowledge that near-term price direction is likely to remain sensitive to macroeconomic signals. Any indication that the Federal Reserve could begin easing policy later in the year may weaken the dollar and provide relief to commodity prices. Conversely, further strength in the US currency or signs of faltering industrial output could extend losses.

Market participants are also attentive to geopolitical developments that could disrupt trade flows or alter risk appetite. Tensions in key shipping routes and uncertainty around global economic cooperation have at times fuelled volatility across asset classes, including metals.