Copper prices rallied on Thursday as a weaker dollar helped investors see value in a metal trading near six-year lows, even as fears persisted that China's equity rout could signal deeply rooted economic problems. The dollar was on the defensive, making dollar-priced metals cheaper for non-US investors, after Federal Reserve meeting minutes suggested policymakers were in no hurry to raise interest rates.
On the downside, Chinese stocks tumbled, sending Asian shares to two-year lows and underscoring fragile confidence in the world's second-largest economy and top copper consumer.
Three-month copper on the London Metal Exchange ended up 2.7 percent higher at $5,119 a tonne from $4,985 on Wednesday, when it hit a six-year low at $4,976.
Copper has deepened its downtrend in August, taking year-to-date losses to 20 percent.
"Market sentiment is very negative about China but we are starting to see signs of recovery, the Chinese are intervening," Bernstein analyst Paul Gait said.
"We're definitely near the bottom of the (copper) price cycle. The world needs to build more copper mines and it's impossible at today's price, therefore this is not equilibrium price."
Indicating better demand, bonded premiums for copper in Shanghai picked up by $5 to $95-$100, the highest since September 2014.
According to consultants CRU, bonded stocks in Shanghai have dropped to 570,000 tonnes from a mid-June peak at 700,000 tonnes. LME stocks at 353,625 tonnes are still close to highs seen last January, though data showed orders to remove metal from warehouses have jumped to 11,450 tonnes.
"Copper producers have been much faster than others to take the foot off the pedal in response to weaker conditions. The foundation is there for more stability behind copper prices later in the year," said analyst Matt Fusarelli of AME Group.
Nickel closed down at $10,405 from Wednesday's $10,410. The stainless steel ingredient is under pressure from weak end-user demand, which overshadowed the latest industry data showing the global market surplus shrank in June.
Tin was untraded at the close, but bid lower at $15,200 from $15,350. News that Indonesia's PT Timah is likely to receive government clearance to resume exports in early September could prove a headwind going forward.
Aluminium gained 1.1 percent to $1,575 from $1,557, zinc to $1,816 from $1,784 and lead to $1,716 from $1,691.
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