Fed Decision Weighs on Copper, Aluminum Prices Tick Up Amid Supply Fears

Copper prices slipped in London ahead of the Federal Reserve's rate decision, as traders weighed the impact of a stronger US dollar on demand. The metal has been influenced by two key factors: US monetary policy and China's physical copper market. A firmer US dollar tends to cool expectations for growth-sensitive demand, while a strengthening yuan can reduce imports from China. However, available London Metal Exchange (LME) copper inventories remain low, and the 'cash' contract is trading at a premium to the three-month contract.

On the other hand, aluminum prices rose to $3,176 per ton despite weak visible inventories on the LME. The geopolitical backdrop has become more significant as the cushion of readily usable stock remains thin. Aluminum's supply chain is vulnerable due to renewed tension in the Middle East and the fact that many buyers avoid Russian-made metal.

The market is cautious about the true availability of aluminum, with headlining inventory numbers potentially misleading. Reuters reported that LME stocks are at a 16-month low of 245,350 tons, but this figure includes a large amount of Russian-made metal that some traders refuse to use. This effectively shrinks the pool of available aluminum for delivery.