METALS-Copper falls on Fed rate jitters; China demand in focus

Recasts, adds details, updates prices

BEIJING, Feb 22 (Reuters) – London copper prices were under pressure on Wednesday from looming fears of higher-for-longer interest rates by the U.S. Federal Reserve, while investors assessed demand outlook from top consumer China.

Three-month copper on the London Metal Exchange CMCU3 was down 0.8% to $9,130 a tonne by 0426 GMT.

Investors interpreted a rebound in U.S. business activity in February to mean interest rates will need to stay higher for longer to control inflation, with Wall Street posting its worst performance of the year on Tuesday.

The dollar was buoyant on Wednesday, making it less attractive for non-dollar holders to buy greenback-priced copper.

A stronger dollar sent China’s yuan to a seven-week low on Wednesday. Investors were also closely watching post-COVID demand recovery trends in China.

“Demand prospect is here to underpin the market, but weak market fundamentals amid stubbornly high inventories will cap prices to break the level of 71,000 yuan a tonne,” analysts at Meierya Futures said.

The most-traded March copper contract on the Shanghai Futures Exchange SCFcv1 was up 1.2% to 70,640 yuan ($10,248.67) a tonne.

China’s total copper consumption would rise around 3.5% in 2023 to 14.6 million tonnes, according to Rosealea Yao, an analyst at consultancy Gavekal Dragonomics.

“That improvement has probably already been priced in by the 6%-10% rise in domestic copper prices since the reopening rally started in early November,” she said in a note.

“Any further price gains from Chinese demand will probably be limited.”

LME aluminium CMAL3 slid 1% to $2,442.50 a tonne, zinc CMZN3 declined 1.2% to $3,098.50, lead CMPB3 eased 0.3% to $2,136 and tin CMSN3 lost 0.9% at $27,285.

ShFE aluminium SAFcv1 shed 0.3% to 18,750 yuan a tonne, while tin SSNcv1 rose 2.6% to 220,590 yuan, zinc SZNcv1 climbed 0.3% to 23,570 yuan, lead SPBcv1 added 0.5% to 15,440 yuan, and nickel SNIcv1 advanced 0.5% to 210,300 yuan.

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($1 = 6.8926 Chinese yuan)

(Reporting by Siyi Liu and Dominique Patton; editing by Uttaresh.V, Nivedita Bhattacharjee)

((Siyi.Liu@thomsonreuters.com;))

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