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Copper prices moved higher on Thursday after the U.S. Federal Reserve cemented expectations that rapid interest rate rises will end soon, weakening the dollar and making dollar-priced metals cheaper for buyers with other currencies.
A rapid softening in the dollar and hopes of revived demand in top consumer China after it lifted coronavirus controls have driven copper from about $7,500 a tonne in November to as high as $9,550.50 last month.
Demand shows little sign of improving, however, with Chinese import premiums falling and Shanghai exchange inventories increasing rapidly.
Copper’s rally halted as China entered its national Lunar New Year holiday last week.
The benchmark three-month contract on the London Metal Exchange (LME) was up 0.8% at $9,156.50 a tonne by 1150 GMT but down 1.2% this week.
“Short term, I think you have to be moderately bearish,” said Dan Smith, head of research at Amalgamated Metals Trading.
But he said investors should buy the dips and forecast that prices would end the year above $10,000 a tonne.
“China’s going to come back strongly; we just haven’t felt it yet,” he said, adding that the weakening dollar and supply issues were also supportive for prices.
Speculators are certainly betting on higher prices, with their net long position in COMEX copper futures jumping to its largest since April.
Some $14 billion flowed into industrial metals markets between Jan. 1 and Jan. 27, with $3.5 billion arriving during China’s New Year holiday, JPMorgan estimated.
The latest supply disruption has come in Peru, where the huge Las Bambas copper mine was set to halt production because of road blockades by protesters.
Global stock markets also rose on Thursday and markets now look towards U.S. non-farm employment data on Friday, which could influence U.S. interest rate policy and the dollar.
Most other industrial metals fell. LME aluminium CMAL3 was down 0.9% at $2,607.50 a tonne, zinc CMZN3 slipped 0.9% to $3,320, nickel CMNI3 lost 1.1% to $28,965 and lead CMPB3 was down 0.1% at $2,135.50. Tin CMSN3 was up 1.4% at $29,215.