(Sept 14): Copper fell towards US$14,000 (RM56,627) a tonne as traders ramped up wagers on a US rate hike and price spreads loosened after fresh deliveries of metal into exchange warehouses.

Three-month futures dropped as much as 1.6% to US$14,018.50 a tonne, the lowest in over three weeks, after data from the London Metal Exchange showed an 8,425-tonne rise in copper inventories in its warehouse network.

The LME copper market faced a severe squeeze in August as stockpiles declined, with prices pushing to new record highs amid fears that global supplies would be drained as traders continued to ship large volumes to the US in anticipation of potential tariffs. 

But the gap between global benchmark prices in London and those on New York’s Comex has been narrowing over recent weeks, eroding the incentive for traders to ship metal to the US, and easing worries about further outflows from the LME. 

Key price spreads also pointed to loosening supply conditions in the LME’s warehouse network on Monday, with cash contracts trading at a US$45-a-tonne discount to three-month futures after inventories rose. That’s a stark reversal from August, when the spread reached a US$545-a-tonne premium, in a condition known as backwardation that signals tight supply. 

Copper and other metals are also facing broader pressures as traders ramp up wagers that the Federal Reserve will soon start raising interest rates. Five of the LME’s six main metal contracts traded lower on Monday, hit by a strengthening dollar and a downbeat mood for risk assets.

“With speculative length reduced but prompt tightness also easing, copper is likely to remain choppy around current levels until stronger dip-buying returns or a fresh macro or fundamental catalyst provides clearer direction,” analysts at Sucden Financial Ltd wrote in a note.

Bets on rate hikes are rising ahead of the Fed’s policy meeting this week, with Friday’s stronger-than expected inflation print underscoring growing price pressures. Tighter monetary policy is typically a headwind for industrial metals like copper, raising borrowing costs for manufacturers and consumers. 

Copper on the LME declined 1% to US$14,077 a tonne at 12.32pm local time. Zinc was down 1.5%, while aluminium edged higher.

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