Copper rose on Wednesday, rebounding further from 5-1/2 year lows as traders took the opportunity to buy at still relatively weak prices ahead of the Federal Reserve's policy statement. Three-month copper on the London Metal Exchange (LME) ended at $5,480 a tonne, up 1.01 percent, to recover from a 3 percent drop in the previous session.
Copper is still down 13 percent so far this month, extending a 20 percent loss registered over 2013 and 2014. It hit a 5-1/2 year low of $5,339.50 a tonne on Monday. The US central bank is expected to signal it remains on track to begin raising interest rates later this year. Fed policymakers will likely restate their "patient" approach to raising rates, while also voicing faith that the economy will continue to pick up.
The dollar was firm ahead of the Fed statement. A weak dollar makes commodities priced in the currency cheaper for holders of other currencies. "If the Fed does emphasise the word "patience" then it could take some more wind out of the dollar rally which is a positive sign for copper," said Naeem Aslam, chief market analyst at Ava Trade. "(However) ... we do believe that today's event may have no firecrackers and perhaps copper will continue its trend towards the downside as supply dominates over demand."
Highlighting high levels of supplies, copper stocks in LME warehouses rose by 6,450 tonnes to 244,675 tonnes, their highest level in more than nine months. The global copper market oversupply is expected to shrink this year and next, helping cushion prices that have suffered due to slowing growth in top consumer China, a Reuters poll showed. Global mining company Anglo American said a sharp drop in commodity prices will likely result in impairment charges for its 2014 financial year, as it posted annual production ahead of its guidance for its key commodities.
Polish copper producer KGHM, faced with a strike at its Chilean mine, Sierra Gorda, said it had contingency plans to maintain low-level production if the dispute was not resolved. In other metals, zinc ended up 0.62 percent at $2,118 a tonne, partially clawing back losses from the session before, helped by a positive price differential for Chinese buyers. Lead was last bid up 0.94 percent at $1,887 a tonne, tin ended down 0.31 percent at $19,245 a tonne, nickel closed up 1.55 percent at $15,030 while aluminium closed down 0.16 percent at $1,852.