LONDON: Copper prices extended gains on Tuesday as traders kept up speculative buying based on expected U.S. tariffs, but concerns persisted that the rally was not based on strong demand.
Benchmark three-month copper on the London Metal Exchange (LME) added 0.4% to $9,997.50 a metric ton by 1030 GMT after gaining 1% on Monday, but shy of its five-month peak of $10,046.50 touched last week.
Traders have been bidding up copper prices especially those in New York, after U.S. President Donald Trump ordered a probe into potential tariffs on copper imports to rebuild U.S. production of the metal.
U.S. most active May Comex copper futures climbed 1% to $5.14 a lb, bringing the premium of Comex over LME to $1,350 a ton or about 13%.
“It’s still all about the arbitrage trade and the ability to shift copper to the US, locking in a tiny profit. It looks like the premium is settling into a mid-range between nothing and 25% tariffs,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“This a market which is extremely difficult to trade right now. This is not end-user demand going through the roof. This is a technical transfer of stocks from one location to the next.”
There have been worries that siphoning copper to the U.S. would create shortages elsewhere, but that is not showing up in technical indications on the LME market, Hansen added.
The spread between the cash LME and the three-month contract is still at a discount of about $30 a ton instead of a premium, which would indicate shortages.
On the Shanghai Futures Exchange, copper climbed 1.2% to 81,910 yuan ($11,281.59) a ton.
A stronger dollar, which ticked up to an almost three-week high on Tuesday after some strong U.S. services data, weighed on metals markets.
A firmer dollar makes commodities priced in the U.S. currency more expensive for buyers using other currencies.
LME aluminium eased 0.4% to $2,606 a ton and nickel dipped 0.2% to $15,975, while zinc gained 0.8% to $2,968, lead advanced 0.9% to $2,055.50 and tin rose 0.5% to $34,535.
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