London copper eases as firmer U.S. dollar dents appeal

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London copper prices fell on Tuesday, as a firmer U.S. dollar made greenback-priced metals pricier for holders of other currencies, although supply tightness in top consumer China lent some support.

Three-month copper on the London Metal Exchange shed 0.8% to $7,519 a tonne by 0718 GMT and aluminum fell 1.8% to $2,219 a tonne.

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The dollar gained as strong U.S. labor data and expectation of data due on Thursday showing stubbornly high inflation have cemented hopes that interest rates would remain high though 2023.

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“Outlook for the rest of the week will still be driven by (macro) headlines and currency moves. Market has mostly covered their shorts over the last week,” said analyst Zenon Ho of broker Marex.

China’s upcoming Communist Party Congress starting Oct. 16 would keep investors trading in caution, Ho added.

“People will want to be lightly positioned into such a key event.”

LME zinc declined 0.9% to $2,937.50 a tonne, lead eased 0.3% to $1,983 a tonne and tin dipped 0.4% to $20,000 a tonne.

The most-traded November copper contract on the Shanghai Futures Exchange rose 1.7% to 62,360 yuan ($8,683.42) a tonne, nickel jumped 3.1% to 183,600 yuan a tonne and tin advanced 1.2% to 176,670 yuan a tonne.

The Yangshan copper premium hit its highest in almost a year at $117.50 a tonne on tight supply, as inventories build-up in ShFE warehouses during the one-week-long Chinese National Day holiday was less than last year.

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The spread between ShFE copper October and November contract spiked to a record high of 1,610 yuan a tonne, and the October-December spread leaped to 2,570 yuan a tonne, due to low visible copper inventories.

Traders imported the metal to alleviate the onshore tightness after the import arbitrage opened, Citi analysts said in a note.

“We may see stronger import flows by China this month, driving an eventual easing in the spreads,” they added.

ShFE zinc increased 1.8% to 24,610 yuan a tonne, lead was up 0.2% at 15,265 yuan a tonne while aluminum edged down 0.3% to 18,465 yuan a tonne.

For the top stories in metals and other news, click or ($1 = 7.1815 yuan) (Reporting by Mai Nguyen in Hanoi; Editing by Subhranshu Sahu, Sherry Jacob-Phillips and Louise Heavens)