Copper fell below $10,000 per metric ton as traders assessed a sharp rise in global inventories and soft U.S. job openings data that bolster bets that the Federal Reserve will be able to cut interest rates this year.
An increase in global copper inventories
Stocks on the Shanghai Futures Exchange have risen to their highest point since 2020 and there has also been a steady flow of inflows into Asian deposits tracked by the London Metal Exchange in recent weeks. Typically, inventories decline this time of year, but this increase has put pressure on prices after copper hit an all-time high above $11,100 last month.
Fewer job openings in the United States
Meanwhile, U.S. job openings fell in April to their lowest level in more than three years, consistent with a gradual slowdown in the labor market. Available positions decreased to 8.06 million from a downwardly revised reading of 8.36 million in the previous month, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Report, known as JOLTS.
Treasury yield rates declined after this report and exchange markets are now pricing in a faster pace of rate cuts this year. This helped copper recover some of the initial losses.
Expectations of lower interest rates and abundant supply
Base metals have surged this year on expectations of lower interest rates in the United States and signs that China’s economy is finally emerging from the pandemic-induced recession. Meanwhile, the continued rise in inventories on exchanges offers evidence that buyers are adequately supplied for now and represents a headwind for bulls predicting prices will rise soon.
“The copper market appears to be more adequately supplied than some traders expected,” said Carsten Menke, head of next generation research at Julius Baer. “A rapid recovery in copper prices therefore seems unlikely in our view and we rather expect the market to consolidate over the summer months.”
The price of copper fell 1.7% to $9,968.50 per ton on the London Metal Exchange at 3:26 pm local time. The metal racked up its third monthly advance in May after hitting an all-time high during the month. Shares of copper miners also fell, with Freeport-McMoRan Inc. down as much as 4.8%.
All other major base metals fell on the LME, except aluminum which rose slightly.
