Copper falls as higher dollar outweighs fresh supply woes

Copper dipped on Tuesday, weighed by a higher dollar and gloomy macroeconomics, which outweighed fresh fears about supply shortages driven by stock withdrawal requests on the London Metal Exchange (LME).

The benchmark three-month copper CMCU3 on the LME was down 0.41% at $14,214 a metric ton by 0301 GMT. The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 edged 0.17% higher to 107,930 yuan ($16,051.93) a ton.

The red metal, like the wider industrial minerals complex, was weighed by a stronger dollar, worries about interest rates and cautious economic sentiment.

It marks a reversal after Monday's gains from a big increase in LME copper warrant cancellations — meaning metal marked for warehouse withdrawal — which "stoked fresh concerns of supply shortages," Daniel Hynes, senior commodity strategist at ANZ, said.

The dollar index =USD was up 0.08%. A stronger dollar can weigh on greenback-denominated commodities by making them more expensive for buyers using other currencies.

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

Traders were pricing in a 42% chance of a rate hike at the U.S. Federal Reserve's September meeting, from 36% a week earlier, according to the CME's FedWatch tool.

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

The dour conditions also helped aluminium shrug off news that the derailment of a train operated by Russian aluminium producer Rusal in Guinea had suspended exports from a 600,000-ton-per-year alumina refinery there.

The light metal dropped 0.67% on the LME CMAL3 and fell 0.21% on the SHFE SAFcv1.