Copper bounced 2.4 percent on thin buying on Wednesday, but investors were cautious ahead of a US Federal Reserve meeting on interest rates, dealers said. At the end of the day's trading London Metal Exchange copper for delivery in three months was at $6,900 a tonne, up $160 from the previous close. The metal lost almost 4 percent on Tuesday.
On the New York Mercantile Exchange's (NYMEX) COMEX division, benchmark September copper ended up 10.10 cents, or about 3.3 percent, at $3.1870 a lb, at the upper end of its $3.0315 to $3.1910 trading range.
"Metals are hanging around waiting for the Fed for direction. People are reacting as if the world is going into recession," Paul Horsnell, analyst at Barclays Capital, said. "We see more aggressive calls (for interest rate rises) because the economy isn't slowing...we see global growth peaking in the second half."
Analysts expect a quarter of a percentage point rise in US interest rates to 5.25 percent on Thursday and will scan the post-meeting statement for clues to the pace of future policy tightening.
A bigger rate rise might slow economic growth and crimp demand for industrial metals. Copper hit a record peak and gold touched its highest in 26 years in mid-May, but both have tumbled more than 20 percent since then, while equity markets also dipped as investors became increasingly risk-averse.
"We likely saw the peak of the base metals price cycle on May 11, which was also the peak in equities," ABN Amro analyst Nick Moore said. He noted that base metals prices had been particularly hard hit since those peaks, and while equity markets followed the same trend, it was to a lesser degree.
Mining equities Antofagasta BHP Billiton and Xstrata all lost around one percent in London trade on Wednesday.
On Tuesday copper ended down $260, or 3.7 percent, at $6,740 after the International Copper Study Group (ICSG) said world refined copper production exceeded consumption by 64,000 tonnes in the first quarter, against a deficit of 89,000 in the same year-ago period.
Peter Richardson, chief metals economist at Deutsche Bank, said in a daily note that the ICSG had omitted inventory changes at the State Reserve Bureau, the body responsible for managing China's strategic copper reserves, in assessing Chinese consumption.Dealers said threats to supply, including strikes at two Grupo Mexico copper facilities and demands for a pay rise of up to 10 percent and improved health benefits at BHP Billiton's Escondida mine in Chile, would continue to limit losses in copper.
Rio Tinto Ltd/Plc. said on Tuesday it intended to move to the next phase in a study that could lead to construction of a large aluminium smelter in Abu Dhabi in the United Arab Emirates.
"Some people had another look at aluminium after the Rio Tinto smelter announcement, but realised it was still a long way off," the first dealer said.
LME aluminium was unchanged at $2,485, zinc climbed $15 to $2,945 and nickel rallied $150 to $20,400.
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