Copper strides higher on inflation data optimism

LONDON: Copper prices ticked higher on Tuesday on optimism that data will show a further decline in U.S. inflation, but gains were capped on worries about rising COVID-19 cases in China.

Three-month copper on the London Metal Exchange added 0.4% to $8,411 a tonne by 1100 GMT, reversing losses in the previous session. Metals markets have gained recently on hopes that U.S. inflation has peaked, allowing the central bank to ease its pace of interest rate hikes.

U.S. consumer inflation data for November lands at 1330 GMT and is expected to show a 6.1% rise on a year-on-year basis in the core reading, which excludes food and energy prices, down from 6.3% in October.

“That inflation report has caused fireworks over the past three or four releases. If we should get a negative surprise this afternoon, there’s the risk of some long liquidation,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Copper is in a range between $8,300 and $8,600 a tonne and if prices broke through the bottom end, they would likely extend down to $8,100, he added.

Weighing on the market was uncertainty in top metals consumer China after it recently began relaxing COVID restrictions.

Copper retreats on worries over China demand

“We reckon that the incoming migration around the Chinese New Year holiday in late-January could bring about an unprecedented spread of COVID,” Nomura Chief China Economist Ting Lu said.

Companies in China were straining to keep operations running normally amid a rise in infections.

“I think the market is confused as to how to approach the short-term outlook on China. On one hand, prices are supported because it’s reopening, but worried that we may go through period with a massive spike of cases,” Hansen said.

The most-traded January copper contract on the Shanghai Futures Exchange dipped 0.3% to 66,070 yuan ($9,466.16) a tonne.

Among other metals, LME aluminium climbed 0.2% to $2,418 a tonne, lead added 0.3% to $2,187.50, tin advanced 1.2% to $24,240, but zinc dipped 0.1% to $3,265 and nickel dropped 1.5% to $29,070.