LONDON: Copper prices recovered on Monday from two sessions of losses as they drew support from concerns over low inventories and investors' quest for a hedge against rising global inflation.
Three-month copper on the London Metal Exchange gained 1.6% to $9,860 a tonne by 1630 GMT after slipping by 1.3% on Friday.
"There's demand from a physical tightness perspective but also from an inflation perspective. Inflation worries are still here, if anything they are moving higher," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Investors often buy commodities as a hedge against expectations of rising inflation.
LME copper has eased from a five-month peak of $10,452.50 hit a week ago largely due to new long positions being liquidated, Hansen added.
"From a technical perspective we've bounced at quite an interesting area, that could indicate that we have seen most of the correction."
Copper inventories in Shanghai exchange warehouses have dropped to 39,839 tonnes, the lowest in more than 12 years, while LME inventories of the metal have shed 37% over the last two months to 159,800 tonnes.
Aurubis, Europe's largest copper producer, is maintaining full output in the face of the surge in energy prices in recent weeks, its CEO said.
LME cash nickel was at a premium of $118 a tonne over the three-month contract, its highest since October 2019, indicating tightening nearby supplies, as on-warrant LME stocks have lost 58% to 75,246 tonnes over the last four months.
The premium of LME cash zinc over the three-month contract was $46 a tonne, also suggesting a shortage of readily available stocks. On-warrant LME zinc stocks have shed 44% since mid-April.
China's Guizhou Power Grid released a document on Oct. 21 asking aluminium smelters to reduce electricity usage, Mysteel consultancy reported, further affecting supply of the metal that has been impacted by a Chinese power shortage for months.
LME aluminium rose 0.5% to $2,883 a tonne, nickel advanced 2.9% to $20,320, lead added 0.1% to $2,442 while tin slipped 0.4% to $37,210 and zinc dipped 0.1% to $3,443.50.