LONDON: Copper prices rose on Wednesday helped by a weaker dollar, which makes metals cheaper for buyers with other currencies, and on hopes for improved demand from top consumer China.
The metal used in power and construction has recovered from a 20-month low but remains down 30% from a record high in March, as aggressive interest rate rises in many countries cause an economic slowdown.
The U.S. Federal Reserve is expected to raise its key interest rate by 0.75% on Wednesday.
Benchmark copper on the London Metal Exchange (LME) was up 0.4% at $7,568 a tonne in official trading after falling to $6,955 on July 15.
Adding fuel to the rebound is short-covering by speculators who ramped up bets on further price falls and are now having to buy back positions, said Marex, a brokerage.
Demand in China is reviving after COVID-19 lockdowns restricted factory activity earlier in the year.
Weaker dollar lifts copper, but demand outlook still shaky
Profits at industrial firms bounced back to growth in June and the government has promised economic stimulus and support for a property sector in a debt crisis.
Copper stockpiles in Shanghai Futures Exchange (ShFE) and Chinese bonded warehouses are low by historic standards and have recently been falling.
Yangshan copper import premiums rose to $87 a tonne, the highest since December, suggesting increased demand for overseas metal.
But China is trying to suppress COVID-19 cases in Wuhan and Shanghai. Analysts at Citi predicted its economic recovery would stall and copper would fall to $6,600 within 6-9 months.
“We recommend selling copper and nickel… over the coming week as a European recession, a broader global growth slowdown, and solid supply growth drive their physical markets into surplus,” they said.
Some key economies are at high risk of recession and inflation will remain high, economists polled by Reuters believe.
Other metals prices fell. LME aluminium was down 1.5% at $2,385.50 a tonne, zinc fell 0.3% to $3,029, nickel lost 1.5% to $21,250, lead slipped 0.4% to $2,014 and tin was down 1.9% at $24,000.
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