Copper powers to almost six-week high on US rate cut hopes

LONDON: Copper prices rose to their highest in nearly six weeks on Tuesday, with buying triggered by expectations of an imminent interest rate cut in the United States, a weaker dollar and signs of improving demand in top consumer China.

Benchmark copper on the London Metal Exchange (LME) was up 1.1% at $9,389 a metric ton by 0954 GMT after touching $9,418 for the highest level since July 18.

Interest rate cuts by the U.S. Federal Reserve would boost U.S. growth and demand but would also apply pressure on the nation’s currency, making dollar-priced metals cheaper for holders of other currencies. The Fed meets over Sept. 17-18.

Macroeconomic factors are still a major influence on copper, one metals trader said, adding that declines in Shanghai copper stocks suggest that Chinese demand is picking up.

Shanghai copper hits 3-week high on rate cut hopes, demand recovery

Copper stocks in warehouses monitored by the Shanghai Futures Exchange (ShFE) have dropped 25% since early June to 251,062 tons, their lowest since March.

Also suggesting more robust copper demand in China is the Yangshan premium, a closely watched indicator of China’s import appetite. The premium is now around $53 a ton, having been at a discount in July.

Traders said that a breach of the 50-day moving average around $9,380 also spurred some buying.

Elsewhere, expectations of tighter aluminium supplies have reduced the discount on the cash contract over the three-month contract to about $5 a ton from $65 in late July.

Traders said that supply tightness is particularly acute for the October-November period, reversing the discount into a premium.

Three-month aluminium was down 0.9% at $2,519 a ton.

Zinc, meanwhile, touched $2,940.50 a ton, up 15% since Aug. 7 on concern about supplies after 14 large smelters agreed to cut production in response to profit-sapping declines in treatment charges. It was last up 0.6% at $2,931.

In other metals, lead slipped 0.3% to $2,110 a ton, tin was up 0.2% at $32,905 and nickel advanced 1.4% to $16,990.