LONDON: Copper prices climbed on Wednesday on optimism about the potential for U.S. interest rate cuts and after a strike hit the world’s biggest copper mine.
Persistent worries about China’s struggling economy, however, capped gains.
Three-month copper on the London Metal Exchange gained 0.8% to $9,026 per metric ton by 0950 GMT, while the September copper contract on the Shanghai Futures Exchange lost 0.7% at 72,010 yuan ($10,073.30) a ton.
Recent data, including U.S. producer prices on Tuesday, have been weaker than expected, fuelling expectations that cooling inflation will allow the Federal Reserve to cut interest rates soon.
Investors are hoping U.S. inflation data later on Wednesday will also be benign.
“It looks like inflation is coming under control and the Fed will be switching from inflation management to growth management, which is why everybody is getting excited about metals positioning,” said Tom Price, head of commodities strategy at Panmure Liberum.
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The dollar index hovered near a one-week low after tumbling in the previous session, making it cheaper to buy the greenback-priced commodity for investors using other currencies.
Also supporting copper prices is a strike at the huge Escondida operation in Chile, raising prospects of a halt to production at the world largest copper mine.
“Escondida is a reminder that almost 90% of the world’s copper units come from mines, not scrap, unlike aluminium,” Price said.
But economic weakness in top metals consumer China kept gains in check, highlighted by data on Tuesday showing bank lending in July hit the lowest in nearly 15 years.
That worsened fears over a continuing economic downturn, hitting industrial activity and dampening demand for metals.
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