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Copper prices held steady on Wednesday but came under pressure from data showing contraction in manufacturing activity in China and a stronger dollar ahead of an interest rate decision from the U.S. Federal Reserve later in the day.
Three-month copper on the London Metal Exchange (LME) earlier touched a one-month high of $8,652 a metric ton after data from the exchange showed another drop in inventories of the industrial metal.
It was up 0.1% at $8,620 a ton in open official rings.
China’s manufacturing activity contracted for the fourth straight month in January, suggesting the sprawling sector and the broader economy were struggling to regain momentum at the start of 2024.
“There’s no improvement in China’s manufacturing PMIs and the dollar is firm,” a copper trader said, adding that copper prices ticked up after LME inventory data and that markets were subdued ahead of the Fed decision.
A stronger U.S. currency makes dollar-denominated metals more expensive for holders of other currencies, which would undermine demand and prices.
Copper stocks MCUSTX-TOTAL in LME-registered warehouses were at 146,475 tons, down 24% since October, and were at their lowest since September.
But the hefty discount for cash over the three-month copper contracts CMCU0-3 suggests the market is not worried about lack of supplies on the LME market.
China’s demand for metals like copper and aluminium showed “surprising resilience”, Wisdomtree’s commodity strategist Nitesh Shah, citing record power grid investments and rising production of solar panels.
Copper consumption in the world’s second-largest economy grew about 4.5% in 2023 as rising demand from the renewable sector offset a contraction in the housing sector, according to the China Nonferrous Metals Industry Association.
LME zinc CMZN3 dropped 0.4% to $2,555 a ton, aluminium CMAL3 was down 0.2% at $2,270, nickel CMNI3 shed 1.3% to $16,300, lead CMPB3 eased 0.4