LONDON: Copper prices fell on Tuesday as investors who had piled in to the market, pushing prices to seven-month highs, grew cautious ahead of an expected U.S. interest rate rise on Wednesday.
Anticipation of a hawkish U.S. Federal Reserve knocked stock markets and lifted the dollar, making dollar-priced industrial metals costlier for many buyers.
Growth-stifling increases to interest rates are also expected this week from the Bank of England and the European Central Bank.
Benchmark copper on the London Metal Exchange (LME) was down 1.2% at $9,096.50 a tonne by 1141 GMT.
The metal used in electrical wiring surged from about $7,500 in November to $9,550.50 on Jan. 18 as the dollar weakened and investors bet that demand in China would revive.
But the rally lost momentum as China closed for the Lunar New Year holiday last week.
Copper under pressure as China demand worry dominates mood
“A correction was probably long overdue,” said Saxo Bank analyst Ole Hansen, adding that the trigger was the stronger dollar ahead of Fed meeting this week.
An expected recovery in Chinese demand coupled with concern over copper supply, mean that prices are unlikely to fall too far, Hansen said.
China’s economic activity swung back to growth in January, data showed, and the International Monetary Fund made a slight increase to its 2023 global growth outlook.
On the supply side, protests and blockades could halt production at the large Las Bambas copper mine in Peru. In top copper producer Chile, meanwhile, mine delays are slowing output growth.
In other metals, the head of the Philippines nickel mining industry warned that a government plan to impose an up to 10% tax on nickel ore exports could force local producers to close.
LME aluminium was down 0.5% at $2,576 a tonne, zinc fell 1.9% to $3,379, nickel rose 0.9% to $29,495, lead was down 0.5% at $2,148 and tin slid by 3.4% to $28,790.
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