Copper prices retreated on Wednesday after hitting a three-week high in early trading, pressured by US inflation data that brought this month's rate hike back into the market's view and strengthened the US dollar. Meanwhile, aluminum prices fell below the $3,000 per tonne mark, touching their lowest level since December 2025. LME copper declined 0.97% to $14,436 per tonne, after earlier rising to $14,700 per tonne, the highest since September 23.
Rate Hike Probability Rises Significantly, Macro Pressure Weighs on Industrial Metals
Against the backdrop of surging gasoline costs, US consumer prices accelerated last month, prompting traders to reassess the Federal Reserve's monetary policy outlook and pushing the dollar index to an 18-month high. A stronger dollar makes dollar-denominated metals more expensive for investors holding other currencies. According to the latest CME "FedWatch" data, the market's expected probability of a 25 basis point rate hike by the Fed in October has risen from 22.1% a day earlier to 47.1%. However, this probability could still be suppressed given that the Fed may avoid raising rates before the midterm elections. Market expectations for December are more noteworthy. Currently, the market believes the probability of at least one rate hike by the Fed before the end of this year has reached 94.7%. Among this, the probability of cumulative 50 basis points of rate hikes by the Fed has reached 44.1%, double that of a day earlier, meaning that assuming no rate hike in October, the probability of a 50 basis point hike in December has reached 44.1%.
Diverging Labor Negotiations at Chilean Mines, Institutions Expect Global Refined Copper to Turn into Surplus
The potential strike risk at BHP Group Ltd (ASX: BHP)'s Escondida copper mine, the world's largest copper mine, had been supporting copper prices. However, BHP Group Ltd (ASX: BHP) and the supervisory union at its Escondida copper mine in Chile stated that the two sides have reached a preliminary agreement, thereby reducing the risk of an immediate strike at the world's largest copper mine. Two industry sources said earlier that negotiators had reached a preliminary agreement expected to be submitted to union members for a vote. The union said in a statement: "The parties have reached a preliminary agreement that includes benefits and severance terms superior to the company's proposal on October 12." BHP Group Ltd (ASX: BHP)'s previous proposal included a final severance payment and a low-interest loan plan, with each worker receiving approximately $30,000 in combined benefits. Just hours before the Tuesday strike deadline, the two sides began negotiations in a last-minute attempt to avoid a worker walkout. A strike, if it had occurred, could have disrupted supply from this mine that occupies a core position in the global copper market. Regarding other mine developments, Chile's Centinela copper mine and two striking unions returned to the negotiating table on Tuesday; while Chile's state-owned copper company Codelco's El Teniente copper mine has suspended some operations following a fatal landslide accident. In addition, the International Copper Study Group (ICSG) released corrected data showing that global copper mine production is expected to grow 1.3% in 2026 and 3.1% in 2027; global refined copper production is expected to grow about 0.4% in 2026 and 3.4% in 2027; global apparent refined copper consumption is expected to grow about 1.5% in 2026 and 2.5% in 2027. Supply-demand balance forecasts indicate that the global refined copper market is expected to have a surplus of about 104,000 tonnes in 2026, with the surplus expected to expand to about 368,000 tonnes in 2027.
Supply Surplus Signs Drag Aluminum Below Key Level, Other Base Metals Weaken Across the Board
Due to signs of supply surplus in the market, LME aluminum fell 1.7% to $2,986.50 per tonne. During intraday trading, aluminum prices broke below the key support level of $3,000 per tonne, touching $2,978 per tonne, the lowest since December 31 of last year. Zinc fell 0.43% to $3,715.50 per tonne; lead dipped 0.03% to $1,901.50 per tonne; nickel, after touching its lowest point since December of last year, ultimately closed down 0.37% at $15,530 per tonne; tin plunged 3% to $50,215 per tonne, having earlier touched its weakest level since June 30.
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