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Copper prices edged higher on Tuesday on hopes that top metals consumer China would roll out more measures to stabilise its economy and stock markets, but a strong dollar curbed gains.
Three-month copper on the London Metal Exchange CMCU3 was up 0.3% at $8,582.50 per metric ton by 1030 GMT after making modest gains on Monday.
Investor confidence in China was hit by a liquidation order for debt-laden developer China Evergrande, which laid bare the depths of the country’s real estate downturn.
“We’ve seen renewed weakness both in Hong Kong and mainland China in the stock markets and that’s a signal that the confidence that is needed is not there,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“Copper is holding up mostly in anticipation of additional support from the Chinese government.”
LME copper has gained 4% since touching a six-week low on Jan. 18 partly on worries over supply due to mine disruptions, forcing analysts to change their forecasts to deficits for this year instead of surpluses.
“The market was caught quite short last week, but most of the shorts have been covered. Whether we’re going to see some fresh longs in the market depends on what happens in China,” Hansen added.
Reflecting weaker Chinese demand for imported copper is the Yangshan premium SMM-CUYP-CN, which has tumbled 50% since early December.
A trader said: “The trend for metals is down due to a lack of China’s physical demand.”
Weighing on the market was a firmer dollar =USD as traders waited for the Federal Reserve’s monetary policy decision this week for clues on when the U.S. central bank might cut rates.