Copper prices rose on Thursday as the U.S. Federal Reserve cut interest rates, while continuing outflows to U.S. copper stocks supported worries about tighter supply in the rest of the world.

The benchmark three-month copper HG1! on the London Metal Exchange rose 1.3% to $11,708 per metric ton in official open-outcry trading.

Heading for the largest yearly growth since 2009, the metal, used in power and construction, is up 33% so far this year after hitting a record high of $11,771 on Monday due to mine supply disruptions and outflows of copper to the U.S.

“The only reason why copper has been rallying is because of the market perception that there are going to be tariffs on U.S. copper imports announced sometime in the middle of next year to be implemented from early 2027,” said BNP Paribas analyst David Wilson.

That keeps the CME-LME arbitrage (0#LMECMXCU:) open, attracting the metal to the CME stocks (HG-STX-COMEX), which soared this year. BNP Paribas estimates that there is also over 500,000 tons of copper off the exchange inventory in the U.S.

Meanwhile, visible global exchange inventory is up over 40% year on year. Wilson said, “So, this idea that there’s no copper is misleading, but this draw of copper units into the U.S. is creating a perception of the ex-U.S. tightness.”

Copper demand in top metals consumer China is heading for a decline within single digit percentage points year-on-year in the fourth quarter, he added.

The Fed rate cut by 25 basis points on Wednesday was in line with expectations and already pretty much priced in. However, the yuan currency hit the 14-month high against the dollar after the Fed decision, making dollar-priced metals more attractive for Chinese buyers.

In other LME metals, aluminium ALI1! rose 0.6% to $2,885 a ton in official activity, lead LEAD1! added 0.3% to $1,985, while nickel NICKEL1! fell 0.1% to $14,640.

Zinc ZNC1! gained 1.6% to $3,131 after hitting its twelve-month high of $3,147.5, while tin FTIN1! climbed 1.0% to $40,400 after it touched $41,330, highest since April, 2022.
Source: Reuters