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Copper prices rose for a fifth day on Wednesday as dwindling exchange inventories raised the threat of tight supply, but investors were cautious ahead of an interest rate decision by the U.S. Federal Reserve later in the day.
Benchmark copper CMCU3 on the London Metal Exchange (LME) was 1.2% higher at $8,859.50 a tonne at 1117 GMT and up from a 10-week low of $8,442 last week.
But the metal used in electrical wiring remains locked in a downward trend since prices hit $9,550.50 in January. It is far below last year’s record high of $10,845.
Demand in top consumer China has recovered more slowly than expected and banking sector turmoil has damaged the outlook for economic growth.
“Price action today will likely be largely dictated by the outcome of the FOMC (Fed) meeting,” said analysts at ING.
The Fed is expected to raise interest rates by 0.25% but investors will be looking to see how banking instability has affected the central bank’s plans.
Global stock markets were cautiously higher, while the dollar fell to a five-week low, helping dollar-priced metals by making them cheaper for buyers with other currencies.
“Copper is holding up very well,” said Bjarne Schieldrop, chief commodities analyst at Swedish banking group SEB.
Rising demand and the difficulty of increasing supply should keep the market tight, he said, predicting prices would average $9,000 a tonne this year and $11,000 a tonne in 2024.
In the LME’s warehouse system, on-warrant copper inventories have fallen to 38,375 tonnes from around 77,000 tonnes at the start of the year.
Quickly delivered cash copper has flipped to a small premium versus the three-month contract on the LME, pointing to tighter supply.
Copper stocks in Shanghai Futures Exchange and COMEX exchange warehouses are also falling.
LME aluminium was up 0.9% at $2,286.50 a tonne, zinc rose 0.3% to $2,873, nickel gained 1.1% to $22,760, lead CMPB3 added 0.6% to $2,107.50 and tin was up 0.4% at $23,130.