Copper steadied on Thursday, recovering from early losses triggered by a rising dollar and higher inventories that cast doubt over demand strength and expectations of tighter supply. Benchmark copper on the London Metal Exchange ended the session 0.2 percent up at $5,732 a tonne. The metal used widely in power and construction has fallen more than 5 percent since breaking above $6,000 last month.
The dollar surged to its highest in 14 years against a basket of currencies after the US Federal Reserve raised interest rates by 25 basis points on Wednesday and signalled that a further three increases are likely next year - one more than forecast at its September meeting. "The dollar is stronger, there is some caution in the market, it's undermined equities and other risk assets," said SP Angel analyst John Meyer.
"I'm reasonably optimistic for copper in the longer term as there aren't any new large projects in the pipeline and the production costs of bringing on more supply are above where prices are now." In the near-term, however, the market is waiting to see how much more copper will be delivered to LME-approved warehouses, where stocks of the metal have jumped nearly 40 percent to 295,300 tonnes since Dec. 8. Most of that has been delivered to warehouses in South Korea, Taiwan and Malaysia. Traders say that much of that metal has come from China.
Firm Chinese demand is expected to support copper prices going into 2017, though further gains could be difficult. "We would like to see more supply cutbacks, declining stock levels and an increase in production disruptions - unusually low this year - if prices are to build on current gains," said INTL FCStone analyst Edward Meir. Three-month aluminium was down 0.6 percent at $1,736 a tonne, zinc rose 0.2 percent to $2,815, lead gained 1.5 percent to $2,350, tin added 0.6 percent to $21,225 and nickel slid 0.9 percent to $11,320.