Copper rides on optimism over stronger China demand, Fed rate decision caps

LONDON — Copper prices climbed on Tuesday as funds bought on growing expectations of stronger demand from top consumer China, but a higher dollar ahead of Wednesday’s decision on US interest rates by the Federal Reserve capped gains.

The benchmark copper contract on the London Metal Exchange ended up by 0.40% at $ 5,820 a ton, nearly 3% above the two- month low at $ 5,652 hit last week.

Traders said buying after the New York open helped copper to reverse early losses.

DEMAND SIGNALS ‘IMPROVING’

China issued data on Tuesday showing that its economy got off to a strong start this year, supported by bank lending, infrastructure spending and a much-needed resurgence in private investment.

China accounts for just under half of global copper demand, which is estimated at around 23 million tons this year.

“A lot will depend on what the Fed does, but the demand signals from China are improving, the data was positive,” Citi analyst David Wilson said.

The Fed’s two-day meeting is expected to conclude on Wednesday with a rate rise, which could boost the US currency, making dollar-denominated metals more expensive for non-US firms and potentially weaken demand.

SUPPLY ISSUES PERSIST

However, copper has been supported for some time by disruptions to output in Chile and Peru due to strikes and in Indonesia, where the government has halted exports of copper concentrate from Freeport-McMoRan’s Grasberg mine.

“Supply- side issues should continue to support metal prices; however investors are likely to remain cautious leading into the FOMC (Fed) meeting and other key economic releases,” ANZ analysts said in a note.

The three- month nickel price gained 0.70% to $10,230 a ton, underpinned by the prospects of a full-scale mining ban in the Philippines, the world’s top exporter of nickel ore.

Philippine President Rodrigo R. Duterte accused some miners of funding efforts to destabilize his government and he talked about a possible plan to impose a ban on mining given the environmental damage producers have caused.

Among other industrial metals, aluminum fell 1.20% to $1,860, zinc rose 0.20% to $ 2,749.50, lead slid 2.20% to $2,223.50 and tin gained 2.70% to $ 19,970. —