Copper prices declined as markets remained cautious ahead of the Federal Reserve's interest rate decision. According to reports from The Economic Times, benchmark three-month copper on the London Metal Exchange was down 0.6% at $13,607 a metric ton, though it held above the 50-day moving average at $13,576. The U.S. dollar was near one-month highs as investors stayed on the sidelines, with markets pricing in a roughly 30% chance of a 25-basis-point hike. A strong U.S. currency makes dollar-priced metals more expensive for buyers using other currencies, while the prospect of higher rates weighs on demand expectations for growth-dependent metals. The latest COTR report shows that the speculative net long position in LME copper increased by 12,668 lots to 60,771 lots in the week ending 24 July, driven by increased participation from both long and short positions.
After scaling a record high of around ₹393 per kg on the MCX during the first week of June, aluminium prices witnessed a healthy correction to nearly ₹330 per kg amid profit-booking and easing concerns over immediate supply disruptions. However, the metal is once again showing signs of strength, with prices attempting to break through important resistance zones. The recent rebound has been supported by tightening global inventories, concerns over energy availability in key producing regions, geopolitical tensions in the Middle East, and expectations of robust demand from the power, transportation, renewable energy, and electric vehicle sectors. Additionally, China's production constraints and growing global emphasis on electrification continue to reinforce the long-term bullish outlook for aluminium, a metal increasingly regarded as one of the most strategic industrial commodities alongside copper.
Adding further pressure on copper and zinc, Asian stocks extended a selloff caused by worries about AI valuations. As reported by The Economic Times, the Yangshan copper premium stabilised at $112 a ton, indicating easing demand compared with a week ago when it hit $115, the highest since November 2022. Available LME copper stocks edged up to 101,975 tons as 975 tons were put back on warrant in LME-registered warehouses in Taiwan. The available stocks remain at the lowest since January after heavy cancellations earlier this month, keeping the premium of the cash LME copper contract over the three-month forward at $30 a ton versus a discount of $49 at the start of July. Positioning changes in other base metals were more modest, with money managers increasing their net long in LME aluminium by just 96 lots to 59,264 lots, while the net long in zinc increased by 4,107 lots to 39,736 lots.
Conversely, aluminium experienced an uptick as escalating conflicts in the Middle East raised supply concerns. According to The Economic Times, aluminium rose 0.9% to $3,176 a ton as tensions in the Middle East escalated, inflating worries about metal supplies from the Gulf region and driving oil prices up sharply. Available LME aluminium stocks are at a 16-month low of 245,350 tons, and are dominated by Russian-made metal, which many traders avoid. In the latest developments, oil prices are trading higher following strikes on US troops and Saudi energy infrastructure, with Brent up more than 4% after the US said it intercepted a surprise attack on US troops. Saudi Arabia intercepted drones from Iranian-backed groups in Iraq, which were targeting Saudi energy infrastructure, with US and Saudi forces carrying out strikes on weapon sites across eastern Iraq. These developments throw cold water on the idea of a swift de-escalation in the Persian Gulf.
The escalating Middle East tensions are creating ripple effects across energy markets, with European natural gas prices also bouncing higher. As reported by Investing.com, QatarEnergy has reportedly extended its force majeure for buyers in Asia and Europe to as far as the end of September, with reports of QatarEnergy looking to subcharter an LNG carrier until the end of October. EU LNG imports are on track to fall a little more than 25% YoY in July, making the job of refilling storage more difficult. EU gas storage is 56% full at the moment, below the 10-year seasonal average of 72%, with heatwaves across Europe adding to the difficulty in filling up storage ahead of the winter. Tighter-than-usual storage at the start of the heating season suggests that gas prices will remain elevated through the winter, with the risk of spikes higher.
