LONDON: Copper prices rose on Wednesday as lower than expected US inflation numbers suggested interest rates there may not have to rise too much further.
The inflation data boosted stock markets and weakened the dollar, helping metals by making them cheaper for buyers with other currencies.
Also supporting copper were supply concerns as inventories in London Metal Exchange (LME) warehouses fell to 56,800 tonnes, their lowest since 2005.
But price gains were lacklustre, with worries about the strength of economic growth and metals demand still haunting markets.
Benchmark LME copper was up 1% at $8,942.50 a tonne by 1605 GMT.
Prices of the metal used in electrical wiring have drifted from a seven-month high of $9,550.50 in January as rising interest rates stifle economic activity and spread turmoil through the banking sector.
“It’s a difficult outlook,” said independent analyst Robin Bhar. “We may have very slow economic growth over the next decade and we still don’t know the fallout from the banking crisis.” US consumer prices barely rose last month but stubbornly high rents kept underlying inflation simmering, likely ensuring at least one more interest rate rise in May.
The International Monetary Fund warned that lurking financial system vulnerabilities could erupt into a new crisis.
Copper’s fundamentals have also softened in recent weeks.
China’s copper cathode output rose by 14% year on year in March, according to researcher Antaike, and an official in Peru said the country expects to produce 2.8 million tonnes of copper this year, almost 15% more than in 2022.
China’s economic recovery appears to be slowing.
“Data for early April points to a potential turning point, with order levels slackening and utilisation rates at wirerod plants finally coming down,” said metals brokerage AMT.
But Bhar said low inventories would keep a floor under prices and electrification would boost demand over time: “I see record prices but perhaps not this year. Maybe next year, or the year after,” he said.
LME aluminium was up 1.2% at $2,329.50 a tonne, zinc rose 1.3% to $2,794, nickel gained 0.5% to $23,590, lead jumped 2.2% to $2,132 and tin was up 1.7% at $24,125.