Copper hits four-month lows; focus on demand, AI and US rates

By Pratima Desai

LONDON, Nov 12 (Reuters) - Copper prices dropped to four-month lows on Thursday as the market fretted about weak demand, partly due to trouble in the AI industry, and expectations of US interest rate hikes that could mean further gains for the dollar.

The selloff accelerated after the New York open on news that Nvidia NVDA.O CEO Jensen Huang is stepping down, leaving the artificial intelligence industry without its biggest champion.

Benchmark copper on the London Metal Exchange was down 1.9% at $13,550 a metric ton at 1538 GMT from an earlier $13,515 - the lowest since July 20.

A higher US currency makes dollar-priced metals more expensive for holders of other currencies, which could subdue demand. This relationship is used by funds that trade using buy and sell signals from numerical models.

US Federal Reserve officials have expressed concern about stubborn inflation and left open the possibility of a 50-basis-point increase at the central bank's meeting December 8-9.

"The inflation print for the US shows that it's still a problem there, so the metal markets is repositioning around that and it's dragging down the copper price," said Panmure Liberum analyst Tom Price.

Overall industrial demand for copper was soft and that the drop in share prices of technology stocks was part of the reason, Price added. "Every time AI takes a hit, copper demand and prices come under pressure too."

Elsewhere, the premium, or backwardation, for the cash aluminium contract over the three-month forward climbed to 36-year highs above $175 a ton , partly due to historically low stocks in LME-registered warehouses . It was last around $120 a ton.

Aluminium stocks in LME warehouses at 226,350 tons have dropped nearly 56% since January, while in warehouses monitored by the Shanghai Futures Exchange they fell 31% last week to 132,605 tons, their lowest since December.

The maturity curve for aluminium prices on ShFE is also backwardated . The November contract was trading at a 355 yuan premium to the December contract .

Three-month aluminium retreated 1.5% to $3,022 a ton, zinc fell 1.4% to $3,704, lead slipped 0.2% to $1,879, tin was down 1.2% at $45,985 and nickel gained 0.3% to $16,235.