SINGAPORE: London copper firmed on Tuesday, reversing previous session's losses, although most investors stayed on the sidelines ahead of a key US Federal Reserve meeting to see which way monetary policy was headed in the world's largest economy.
Economists polled by Reuters believed the Fed would launch a stimulus programme despite recent signs of an improving labour market, but cautioned that the scale might be smaller than initially expected. Last month Fed Chairman Ben Bernanke stopped short of signaling further quantitative easing in a congressional testimony, which triggered a sell-off in gold and silver, pressured copper and shored up the dollar.
"The consensus in the market is that the Fed is unlikely to announce aggressive easing today, which is in line with what it has said since February," said Chen Dixi, an analyst at Jinrui Futures, a unit of China's top copper producer Jiangxi Copper.
"If we don't see any surprise, copper will continue to seesaw with a bias towards the downside on concerns of slower economic growth in China."
Three-month copper on the London Metal Exchange gained 0.8 percent to $8,512 a tonne by 0703 GMT. The most-traded June copper contract on the Shanghai Futures Exchange rose 0.7 percent to 61,040 yuan ($9,600) a tonne.
Trading volumes, however, were light. "There is really not a clear direction and people want a fresh stimulant," said a Shanghai-based trader, adding that copper could be trading in the range of $8,100 and $8,600 in the near term.
The dollar index stepped off a seven-week high hit in the previous session, helping support sentiment in dollar-priced commodities by increasing the purchasing power of buyers holding other currencies. Physical copper consumption in China has ticked up in March, but the improvement has been overwhelmed by the rapid increase in copper supply, analysts said.
China's copper imports in February recorded a surprise jump of 17 percent on the month to 484,569 tonnes. "The strong February imports number added to concerns of rapid supply increase," said Chen of Jinrui Futures.
"We are now facing high stockpiles, lukewarm physical demand and lowered growth target all these would put pressure on prices."
Peru's Southern Copper, a major global copper producer, expected the global copper supply to fall short of demand until the second half of 2013 as environmental and financing difficulties delay new production plants.
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