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Copper reaches 16-month high due to supply concerns and lower dollar

The copper price rose to its highest level in 16 months on Thursday, as fears of shortages caused by supply disruptions and the lower dollar surpassed weak demand forecasts for China's leading consumer.

The benchmark copper price on the London Metal Exchange rose 1% to $10,479 per metric ton, up from $10,520.5. This is the highest level since May of last year, when industrial metal prices reached record highs over $11,100 per ton.

The latest on supplies comes from Indonesia, where Freeport McMoRan’s Grasberg operations suspended operations on 8 September after a deadly mudslide. The suspension of operations at Grasberg comes after other major disruptions in this year, including Kamoa Kakula mine in the Democratic Republic of Congo (DRC) and El Teniente in Chile.

The dollar is also under pressure due to the shutdown of the U.S. Government. Tom Price, Panmure Liberum's analyst, said that the dollar was already under stress due to tariffs and a slowing U.S. economic growth.

The lower dollar makes metals priced in dollars cheaper for holders of currencies other than the U.S. dollar, which could increase demand for industrial metals.

After partisan differences prevented Congress and White House from negotiating a funding agreement, the U.S. Government has closed down many of its operations.

Private surveys this week showed that factory activity fell in many parts of the world in the last month. Signs of a slowdown of U.S. economic growth, and the expected impact of President Donald Trump’s tariffs were added to the pressure of weak Chinese demand.

The focus was also on the zinc stocks registered at LME warehouses, which have fallen by 66% from mid-July to their lowest level since March 2023. .

Concerns over the availability of zinc at the LME have fueled a surge in premiums for the cash contract in the three months ahead to three-year-highs around $80 per ton, compared to a $6 discount back in July .

The price of three-month zinc rose by 1.1% to $3,020 per ton after hitting a high of $3,032 in the previous nine months.

Other metals saw a 0.6% increase in aluminium to $2.704.5. Lead rose 0.4% at $2.018.5. Tin advanced by 0.8% to $35,300. Nickel increased 0.6% per ton to $15,280.

(source: Reuters)