LONDON: Copper prices rose on Monday as floods in top consumer China sparked demand hopes at a time when inventories were falling, while a softer dollar also supported prices.
Benchmark copper on the London Metal Exchange was up 0.9% at $9,604.50 per tonne in official trading, after touching its highest since June 16 at $9,665. It was on track for a fifth straight session of gains.
Floods in central China, especially in the industrial and transport hub city of Zhengzhou in Henan province, have raised supply concerns and demand for rebuilding damaged infrastructure.
Copper is mainly used in the construction and power industries and China accounts for about half of global copper consumption.
“Sentiment has brightened again in the last few days, reflected in the copper price,” Commerzbank analyst Daniel Briesemann said, adding he believed copper was due for a correction, having hit a record of above $10,700 a tonne in May.
A Singapore-based trader said the market was pricing in disruptions to output from floods in Henan and demand for reconstruction.
INVENTORIES: On warrant copper stocks in LME-registered warehouses fell to 205,800 tonnes while metal in warehouses monitored by the Shanghai Futures Exchange fell to their lowest since Feb. 10 at 96,087 tonnes.
PREMIUMS: In a sign of rising physical demand in China, Yangshan premiums have climbed to $47.50 a tonne from recent lows of $21 touched in June.
SPREADS: The discount of LME copper over three-month contract narrowed to about $21 a tonne from about $40 a tonne two weeks ago. This was the tightest since July 7.
FED: The dollar softened as markets anticipated the outcome of a meeting by US Federal Reserve for clues on the pace of monetary policy changes, which has implication for liquidity and base metals.
OTHER PRICES: Aluminium eased 0.2% to $2,508.50 a tonne, zinc was barely changed at $2,963.50, lead advanced 0.3% to $2,381.50, tin was steady at $34,476 and nickel rose 0.4% to $19,481 after touching its highest since Feb. 25.
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