Copper edges lower on firmer dollar, uncertainty around U.S. rates

Inventories in warehouses registered with the LME MCUSTX-TOTAL tumbled by nearly 50% in the 2-1/2 months until mid-August, prompting worries about supply, but stocks have since rebounded by 17%.

The squeeze in inventories sent the premium for cash LME copper over the three-month contract CMCU0-3 to a peak of $545 a ton on August 17, but that has since collapsed to $71.

Also curbing appetite for base metals was a firmer dollar index =USD, which makes commodities priced in the U.S. currency more expensive for buyers using other currencies.

Tariff worries and an apparent impasse in talks to end the Middle East war have also raised fears about U.S. interest rates remaining higher for longer.

Higher interest rates can weigh on growth-dependent industrial materials such as copper, which is used in power and construction, by dampening economic activity.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 edged 0.2% higher to 107,980 yuan ($16,060.80) a ton.

Among other metals, LME aluminium CMAL3 fell 0.8% to $3,203 a ton, zinc CMZN3 was little changed at $3,836, lead CMPB3 dipped 0.2% to $1,907.50, nickel CMNI3 lost 0.9% to $16,870 and tin CMSN3 dipped 0.1% to $55,675.

($1 = 6.7232 Chinese yuan)

Copper prices dipped on Tuesday as a stronger dollar and uncertainty about U.S. interest rates prompted many investors to stay on the sidelines.

Benchmark three-month copper CMCU3 on the London Metal Exchange was down 0.2% at $14,245.50 a metric ton by 0915 GMT, having added 0.4% in the previous session.