Copper Slips as the Week Ends Amid Macroeconomic Uncertainties

On Thursday, copper slipped lower as the conflict in the Middle East witnessed heightened volatility and macroeconomic variables weakened the price support offered by the possibility of the U.S. imposing tariffs on imports of the refined metal.

A ton of the metal for delivery through the London Metal Exchange (LME) dropped to $13,572 per ton for 3-month delivery orders. This marked a 0.32% decline for the industrial metal. In Shanghai, the most traded contract for copper also shed 0.29% to settle at $15,366 per ton.

While oil prices had recorded some gains in previous trading sessions, Thursday saw crude losing 0.1%. This came despite fierce tit-for-tat strikes by Iran and the United States that were the heaviest since the two agreed to a temporary truce nearly two months ago. Oil prices have been elevated since this conflict broke out back at the end of February.

Data from China indicates that producer prices increased again, for the third time in May. This brought this index to its highest level last seen in 2022. Improved demand in some industries and soaring commodity prices drove this increase.

In the U.S., May data showed inflation was running hot and had climbed to 4.2%, the highest it has reached in four months. The Fed depends on this data when making its policy decision, and the next meeting of the FOMC could see the members being more hawkish or at least very reluctant to cut rates.

This comes on the heels of jobs data showing the economy was more resilient than had been predicted, and the favorable jobs report helped the USD climb while also increasing chances that the Fed could increase benchmark lending rates to curb inflation.

These possibilities have put a damper on copper prices as a strong dollar and higher rates put pressure on industrial metals because they pump the brakes on industrial activity.

The United States is expected to make a decision later this year on whether or not to levy import tariffs on refined copper products. Analysts expect a rate of about 15%, which could be stepped up to 30% with effect from 2028. This prospect has helped to prevent prices from falling further since traders are getting ready to start frontloading the metal into the U.S., thereby creating supply shortages in other markets.

For now, everything is still in flux, and copper ecosystem participants like Numa Numa Resources Inc. will be watching any pertinent developments keenly to assess how their strategic plans could be impacted.

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