Copper edges higher but momentum drains from price rally
LONDON — Copper edged higher on Tuesday but an expected increase to U.S. interest rates was helping to drain momentum from a rally that drove prices to seven-month highs this month.
Copper had fallen sharply earlier in the day as concerns of a hawkish tone from the U.S. Federal Reserve boosted the dollar, making industrial metals costlier for buyers holding other currencies.
But data showing a slowdown in labor cost inflation then buoyed investor confidence that interest rates will not need to rise too much further, boosting stock markets and weakening the dollar.
Benchmark copper on the London Metal Exchange (LME) was up 0.1% at $9,215 a tonne at 1701 GMT.
The metal used in electrical wiring surged from about $7,500 in November to $9,550.50 on Jan. 18 as the dollar weakened and investors bet that demand in China would revive.
Though prices are still up 10% this month, the rally lost momentum as China closed for the Lunar New Year holiday last week.
“A correction was probably long overdue,” Saxo Bank analyst Ole Hansen said of copper’s declines early on Tuesday, adding that the expected recovery in Chinese demand and concern over copper supply meant prices were unlikely to fall far.
China’s economic activity swung back to growth in January, data showed, and the International Monetary Fund made a slight increase to its 2023 global growth outlook.
On the supply side, protests and blockades could halt production at the large Las Bambas copper mine in Peru, and in top copper producer Chile, output fell year on year in December and mine delays are slowing production growth.
In other metals, the head of the Philippines nickel mining industry warned that a government plan to impose an up to 10% tax on nickel ore exports could force local producers to close.
LME aluminum was up 1.7% at $2,633 a tonne even as lower premiums for shipments to Japanese buyers reflected slack demand and high stocks.
Zinc fell 1.3% to $3,400, nickel rose 3.5% to $30,250, lead was down 0.8% at $2,142 and tin slipped by 0.9% to $29,555. (Reporting by Peter Hobson Additional reporting by Mai Nguyen in Hanoi Editing by David Goodman)