Copper holds near 9-1/2 year high as weak dollar, low inventories support

LONDON: Copper hovered near 9-1/2 year highs on Wednesday on a weaker dollar, low inventories and hopes that the metal will benefit from higher demand as major economies recover from the impact of coronavirus.

Benchmark three-month copper on the London Metal Exchange (LME) rose 0.3% to $9,231 per tonne by 1200 GMT, after touching a peak of $9,342. It was on track for its fifth straight session of gains.

"After looking at the macro background, I think there could still be legs in (the copper price rally) during the next three months or so," said ING analyst Wenyu Yao.

"The macro story of strong growth and higher inflation is likely to be the main theme."

Low global inventories of copper - which is used in power and construction - and rebounding demand in Europe and the United States have boosted the price in recent sessions.

On Wednesday, Germany's economy beat growth expectations due to strong exports and solid construction activity.

DOLLAR: The dollar was softer, making assets priced in the greenback more appealing.

INVENTORIES: On-warrant LME inventories of copper - those not earmarked for delivery and available to the market - rose 17% to 54,550 tonnes.

But visible stocks of the metal are dwindling globally, a sign of healthier demand.

SPREADS: The premium for cash copper over the three-month LME contract fell to $16 a tonne from a high of $49.50 on Friday.

POSITIONING: The LME net spec long is at its highest since 2017 at 55% of open interest as of Monday, according to estimates by broker Marex Spectron.

BULLISH: Shanghai Dalu Futures, the Chinese brokerage that has amassed a $1 billion long position on Shanghai Futures Exchange (ShFE) copper, is also very bullish on the metal on ShFE's subsidiary bourse.

OTHER PRICES: LME aluminium was steady at $2,145 a tonne, zinc slipped 0.7% to $2,836, lead shed 0.8% to $2,106, tin added 0.6% to $26,665, and nickel lost 0.3% to $19,300.