Copper prices fell on Thursday in London, weighed down by a firmer dollar, but falling metal inventories and demand showing signs of improvement limited losses.

Three-month copper on the London Metal Exchange fell 0.3% to $9,232 per metric ton by 0238 GMT, while the most-traded September copper contract on the Shanghai Futures Exchange advanced 0.2% to 73,870 yuan ($10,352.61) a ton.

The dollar index edged up 0.2%, rebounding from its lowest in nearly eight months hit on Wednesday, as US interest rate cut hopes weighed.

A firmer dollar makes greenback-priced metals more expensive to holders of other currencies. However, the price fall in metals are limited.

“The macroeconomic backdrop is not looking as gloomy as recently feared. Fundamentals are showing signs of improvement too,” said ANZ analyst Soni Kumari, referring to possible output in for copper, aluminium, nickel and zinc.

“Inventories are retreating and contango forward curve is narrowing… suggesting a tighter market. Downstream demand is showing signs of improvement as well for copper and aluminium,” she added.

SHFE zinc climbed as much as 1.7% to 23,780 yuan a ton, its highest since July 18.

LME zinc rose to as high as $2,870 a ton, a level unseen since July 17.

China demand hopes, lower dollar lift copper prices

Bloomberg reported on Wednesday that Chinese zinc smelters were discussing possible output cuts after tight supplies of concentrates forced spot processing fees into negative territory.

“Chinese smelters are suffering big financial losses now with such low treatment charges and a few smelters that cannot obtain enough concentrates have to cut production,” said CRU analyst Dina Yu.

LME nickel fell 0.7% to $16,790 a ton, tin eased 0.1% to $32,650 while aluminium was almost flat at $2,486.50 and lead rose 0.1% to $2,087.

SHFE aluminium rose 0.5% to 19,850 yuan a ton, tin increased 0.6% to 265,740 yuan while nickel fell 1% to 129,630 yuan and lead shed 0.7% to 17,490 yuan.