Copper reversed earlier losses on Wednesday, as the dollar dipped and markets reassessed the previous day's surprise interest rate hike by top consumer China. Benchmark copper for three month delivery on the London Metal Exchange closed at $8,340 a tonne from $8,260 at the close on Tuesday and compared with a session low at $8,170.
On Tuesday, the red metal hit a 27-month high of $8,492 a tonne, but tumbled more than 2 percent, its biggest one-day fall since July, after China surprised markets by raising interest rates for the first time in nearly three years. "A decent sell-off yesterday in response to the Chinese rate hike," said Daniel Major, analyst at RBS Global Banking & Markets. "The markets are treading water to an extent - currency markets are helping.
China accounts for more than 30 percent of global copper demand, estimated at about 19 million tonnes this year. Analysts have said tighter supply should underpin copper in the longer term. "Although the Chinese rate announcement is undoubtedly a new variable to contend with, we do not think it is a significant 'game changer', for metals," Edward Meir, senior commodity analyst at MF Global, said.
Despite the latest data showing a small rise, copper stocks have been dwindling for months, standing at 370,750 tonnes. Aluminium ended at $2,362 a tonne versus Tuesday's close of $2,357. Daily average primary aluminium output rose to 66,700 tonnes in September from 66,500 tonnes in August, provisional figures from the International Aluminium Institute showed on Wednesday.
Zinc closed at $2,440 a tonne, versus Tuesday's close of $2,392, while battery material lead ended at $2,450 from $2,400. Tin closed at $26,750 a tonne. It was last quoted at $25,850/$25,900 at Tuesday's close. Reinforcing high prices were two large holdings of LME stock warrants and cash contracts.