Metals-Copper holds firm as supply fears offset demand gloom

Copper nudged up slightly on Monday, supported by shrinking inventories and underwhelming supply from top producer Chile, while a weak demand outlook weighed.

Benchmark three-month copper CMCU3 on the London Metal Exchange rose 0.06% to $13,533.5 a metric ton by 0710 GMT. The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 rose 0.2% to 104,020 yuan ($15,361.44) a ton.

The losses were limited by ongoing supply concerns, Daniel Hynes, ANZ senior commodity strategist, said in a note.

"BHP cut its copper production guidance for the year ahead after a mechanical failure at a South Australian mine and lower ore grades in Chile. This comes following data showing growth in Chile’s copper production remains elusive," said Hynes.

Mining major BHP Group BHP.AX last week flagged an expected decline in Chilean copper production next year.

Australian miner South32 S32.AX missed fourth-quarter copper production on Monday, as inclement weather hampered mining operations at a Chilean project.

More broadly, Goldman Sachs said on Monday it expects the ex-U.S. copper market to remain tight in the near term. It added that if the Middle East conflict escalated further, adding to inflation and rate hike concerns, prices could face pressure.

Fighting between the U.S. and Iran over the weekend fanned fears that higher inflation could lead to higher-for-longer interest rates, which could weigh on growth-dependent industrial minerals.

Meanwhile, copper inventories are waning. Available copper stocks on the LME MCUSTX-TOTAL have sharply declined amid a spree of warrant cancellations.

More than half of the copper in LME-registered warehouses was under cancelled warrants - indicating metal earmarked for withdrawal - as of Friday, exchange data showed.

The red metal has also been pulled into the U.S. ahead of potential tariffs on refined copper.