Copper steadies ahead of Fed decision, helped by signs of China’s expansion

LONDON — Copper steadied on Wednesday as investors remained upbeat on China’s growth prospects but were anxious ahead of an expected US rate rise and Federal Reserve commentary on the outlook for monetary policy and growth next year.

Investors are concerned that the dollar will get a further boost if the central bank signals an acceleration in the pace of rate rises next year to deal with an expected ramp up in fiscal spending under incoming president Donald Trump.

The spending plan is seen as inflationary and copper has until now attracted investment as an inflation hedge. This has happened despite a dollar rally, which usually weighs on metals priced in the US currency and could yet do so again.

“Copper has been correlated with the dollar but we don’t think it’s sustainable. Ultimately the stronger dollar is making copper more expensive and at some point that will bite,” said Caroline Bain, senior commodities economist at Capital Economics.

“It’s been getting ahead of itself on optimism over demand, both from China and the US. We think there won’t be new stimulus in China and over the first quarter the impact of this year’s stimulus will fade,” she said.

Three- month copper on the London Metal Exchange (LME) ended up 0.50% at $5,722 a ton.

The metal has risen 22% since mid- October, driven by encouraging signs of demand growth in China, which consumes nearly half the world’s copper, and as stocks are withdrawn from global exchange warehouses.

In upbeat demand signals from Asia, Chinese banks extended 794.6 billion yuan ($ 115 billion) in new yuan loans in November and look set to extend a record amount of credit this year as Beijing boosts the economy to meet growth targets.

But weighing on the metal was data showing a third consecutive day of big inflows into LME warehouses, which has pushed on-warrant or available copper stocks up 68% in three days.

In other metals, nickel ended up 0.20% at $11,420.

New Caledonia’s nickel ore miners have applied to increase shipments to China after an environmental crackdown on Philippine mine supply this year caused prices to spike, four sources familiar with the matter said this week.

Aluminum ended up 0.30% at $ 1,746, zinc ended up 3.90% at $2,810, lead ended down 0.30% at $2,316 while tin ended down 0.90% at $21,100.

The global zinc market deficit narrowed slightly to 17,000 tons in October, while the global lead market saw a surplus of 11,000 tons, industry data showed. —