Copper prices on the London Metal Exchange (LME) experienced a decline today, with a 1.3% drop to $8,500 per metric ton. This downturn is attributed to the recent strength of the US dollar and an increase in stocks within LME warehouses. The metal, often regarded as an indicator of economic health, has come under close observation following these developments.
Last week, copper reached a four-month high at $8,640 but has since faced challenges due to various market factors. Notably, LME stockpiles have swelled to 174,900 tons compared to mid-year figures. This growth in inventory is occurring alongside mixed signals from China's November factory activity results among other factors.
Additionally, the proportion of cancelled warrants in the LME has seen a significant rise, hinting at possible future withdrawals from inventories. As the US dollar strengthens, the cost for holders of other currencies increases, leading to a dampened demand for dollar-priced metals such as copper.
This comes after recent supply concerns had momentarily supported copper prices. On Friday, First Quantum Minerals (OTC:FQVLF) Ltd suspended its annual production guidance for its Cobre Panama mine due to ongoing contract disputes with the government and initiated arbitration proceedings. Despite these operational challenges contributing to supply constraints, the price of copper still fell by 0.4% to $8,579.50 per ton today due to the broader market conditions.
In response to these supply uncertainties and reflecting market tightness, global miners and Chinese smelters have agreed on lower treatment and refining charges (TC/RCs) for copper concentrate for 2024. This marks the first decrease after three years of stability in TC/RCs. Correspondingly, the Shanghai Futures Exchange's January copper contract earlier saw an uptick of 0.8%, closing at 68,880 yuan ($9,658.15) per ton amidst these developments.
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