LONDON: Copper rose to hit a 1-week high on Tuesday as the dollar softened and market players were hoping the euro zone would take new measures to shore up its faltering economy, but slack metals demand in top consumer China kept a lid on prices.
Markets have enjoyed a strong run after the European Central Bank (ECB) promised to step in and buy bonds to ease pressure on Spain and Italy, albeit under strict conditions that are yet to be spelled out.
Expectations the ECB will act soon boosted the euro, which rose near a one-month high against the dollar.
A weaker US currency makes dollar-priced commodities such as metals more affordable more holder of other units.
Three-month copper on the London Metal Exchange was up 0.8 percent to $7,552 per tonne by 1020 GMT from $7,495 at the close on Monday. Prices have so far shed more than 13 percent from the year's high hit in February.
"We are sitting here and waiting for the eurozone to deliver something," said Andrey Kryuchenkov, analyst at VTB Capital.
"Markets are up on speculation that the ECB will make a move soon but copper has been range-bound since the June sell-off and it is unlikely to move much until you see the Chinese depleting their domestic warehouses. Chinese demand is still anaemic at the moment."
Inventories of copper in China have risen drammatically since the end of last year as the growth pace of the country started to slow down, raising worries about the metals consumption prospects.
China's copper stocks could start to come down in the early autumn, when usually demand sees a seasonal uptick, and as the Chinese authorities will likely implement more measures to boost the economy, according to VTB Capital.
Two sources at smelters said China's copper smelters are planning to increase refined copper exports following recent tax adjustments that have reduced their export costs.
The move could shift thousands of tonnes of refined copper back to London Metal Exchange warehouses and pressure global prices.
SLUGGISH DEMAND
Reflecting still sluggish demand from end users in China, premiums for physical metal have slipped, Citi noted in a report. "Chinese copper premia have ... come off, now at $65 a tonne having reached a high of $85 in early July," it said.
China's economy is facing downward pressure from shrinking external demand and a domestic property market downturn.
A string of economic data from Chinese later this week should give some more hints on the state of the world's second-largest economy.
Nickel was at $15,750 from $15,805 while tin was at $18,175 from $17,825.
Indonesia's PT Timah has stopped selling tin on the spot market because of low market prices for the metal, cutting shipments this month from the world's largest tin exporter.
Zinc, used in galvanizing was at $1,854 from $1,849 Monday's close while battery material lead was at $1,989.75 from $1,891 and aluminium was at $1,888.50 from a last bid of $1,878.
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