London - Copper edged up on Wednesday after three days of falls, though uncertainty about the US fiscal outlook and monetary policy kept gains in check.
A United States Senate vote is due later on Wednesday on a motion that would allow the government to keep running beyond the end of the month when budgets are due to expire, though lawmakers have yet to find common ground.
Investors, wrong-footed by last week's shock decision by the Federal Reserve not to begin trimming its bond-buying stimulus, are cautious on riskier assets like copper.
Yet physical demand for copper in top consumer China remains healthy, with premiums for metal in bonded zones holding in a $170-$200 range, according to China based price provider Shmet. (http://www.shmet.com/)
China consumes about 40 percent of the world's copper.
“Destocking in China has ended and the economy is picking up, there's no doubt about that at all,” said Nic Brown, head of commodities research at Natixis.
“We still in a market that's in deficit. In 2014 there's more supply coming on stream so eventually there will be downward pressure on copper, but before that there's every prospect the market gets squeezed aggressively.”
Three-month copper on the London Metal Exchange was up 0.42 percent at $7,178 a tonne by 13:15 SA time, after three consecutive days of falls that eroded gains made following the shock Fed decision last week not to taper stimulus.
Copper prices have been held back in recent weeks by US fiscal and monetary policy uncertainty, and also by long standing worries that the market is well supplied and moving into surplus.
Those supply worries, however, receded on Wednesday after Japanese copper smelters proposed a 45 percent rise in the term premiums they want to charge Chinese end-users next year, reflecting expectations of rising demand and tight supplies.
Also, Aurubis, Europe's biggest copper smelter, said on Wednesday it will offer 2014 copper term premiums for its European customers at $105 per tonne - an increase of $19 per tonne from last year.
Premiums are paid above the LME spot price to cover physical delivery costs, but they also vary according to supply demand dynamics, rising when market balances are tight, for example.
Looking into next year and beyond however, copper market supplies are still expected to expand significantly.
BHP Billiton , the world's biggest mining company, on Wednesday said global commodities markets were being undermined by rising supplies of raw materials, but added that market conditions for copper over time should become more influenced by resource decline.
It also said it expected over capacity in the aluminium and nickel industries to persist.
Newmont Mining Corp said on Tuesday it is open to adding more copper production to its core gold business, as the biggest US gold miner, along with its peers, seeks to revamp operations in a tough environment. - Reuters