(Bloomberg) -- Copper declined as expectations for a US rate hike and risks around artificial intelligence stocks reduced appetite for industrial metals.
The red metal had rebounded in the previous session after Iran and Israel agreed to halt strikes against each other, which had threatened to derail negotiations to end the wider regional conflict. The Iran war, now in its fourth month, has driven up inflation and raised the prospect of higher interest rates that could slow global growth and metals demand.
Some bulls are exiting base metals due to uncertainty around rate hikes, said Zhenting Zhou, a trader with Hangzhou Chenglian Industrial Co. Risks around AI stocks are also deterring investors, he added.
Shares of AI companies have been linked to metals trading in recent months, led by copper and tin due to their use in electrical wires and other equipment. A three-day selloff in tech stocks highlighted risks to the base metals complex, though the pressure abated on Tuesday.
Still, aggregate open interest for copper on the Shanghai Futures Exchange fell to the lowest since September, according to bourse data.
The decline came in spite of a surge in Chinese exports last month, up more than 19% from a year earlier, topping forecasts as booming demand for AI hardware offset disruptions from the war in Iran.
For the long term, sustained strong demand for the industrial metal means prices will rise to and average of $8 a pound ($17,636 a ton) in 2030 and 2031, according to Jefferies analysts, who adopted a previous bullish scenario as their new base case.
Copper was down 0.4% at 13,565 on the London Metal Exchange as of 12:125 p.m. in Shanghai. Other base metals also declined, with tin slipping 1.1% to $51,720 a ton.
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