Copper prices dip on strong dollar and rising inventories before rally on demand outlook

• Copper prices declined recently due to stronger US dollar and rising exchange inventories
• Lunar New Year slowdown in China reduced industrial activity and weakened copper demand
• Trading activity slowed as Chinese markets remained closed during the holiday period
• Prices rebounded on strong global demand linked to electrification and infrastructure growth
• Declining production in Chile and expectations of future supply deficits supported copper prices

Copper prices recently declined before recording a strong rebound as changes in currency movements, inventory levels, and supply expectations influenced global metals markets. The earlier drop was linked to rising inventories and weaker consumption during a holiday period in China, while the later surge reflected stronger demand prospects and tightening supply outlooks.

The decline occurred as the US dollar strengthened, making dollar-denominated metals more expensive for buyers using other currencies. This shift reduced purchasing activity in international markets and placed downward pressure on copper prices.

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Supply conditions also weighed on the market. Rising copper inventories in exchange warehouses signalled greater product availability, which reinforced expectations of ample supply and contributed to the price decline.

Demand conditions weakened during the same period as industrial activity slowed in China during the Lunar New Year holiday. With Chinese markets closed and manufacturing operations temporarily reduced, consumption from the world’s largest copper user declined. The holiday slowdown also limited trading activity and dampened buying interest in the market.

Market direction changed recently as expectations of stronger global demand began to influence trading sentiment. Increasing consumption linked to electrification projects, power grid expansion, and infrastructure development strengthened the outlook for refined copper demand and supported higher prices.

Investor sentiment also improved after several major financial institutions revised long-term copper price forecasts upward. These projections encouraged investors to build long positions in the market, contributing to the upward movement in prices.

Supply concerns added further support. Expectations that copper supply deficits could widen in the coming years raised concerns about tightening market balances.

Production developments in Chile, one of the world’s largest copper producers, also influenced the market. Declining output in the country reduced global supply availability, while weaker industrial production in a key producing region signalled ongoing supply constraints. These factors contributed to the recent increase in copper prices.