Copper rose 1 percent to a week high on Tuesday ahead of a US Federal Reserve monetary policy statement as a better macro environment and a drawback in inventories boosted hopes of an improving outlook for industrial metals demand.
Benchmark copper on the London Metal Exchange gained 1 percent to trade at $8,528 a tonne by 11:43 SA time, from $8,445 a tonne at the close on Monday.
Earlier, the metal used in power and construction hit a session peak of $8,544.75, its highest since March 5.
Investors were betting that data from Germany and from the US today would point to an economic recovery.
Germany's ZEW economic sentiment indicator, due at 12:00 SA time, is forecast at 10.0 versus 5.4 last month, while US February retail sales are also expected to show an increase.
“The macro environment has remained quite positive and metals held pretty well on the back of that,” said Barclays Capital analyst Gayle Berry.
“A draw back in inventories is also supporting; cancelled warrants are giving no signs of decreasing and physical premiums in China appear to be raising.”
Investors were awaiting a US Federal Reserve meeting later today which should provide more clues on the monetary policy that the world's largest economy is going to undertake.
Economists polled by Reuters believed the Fed would launch a stimulus program despite recent signs of an improving labor
market, but cautioned that the scale might be smaller than initially expected.
Improved market sentiment was also offsetting a slightly stronger dollar against a basket of currencies.
A stronger US unit makes dollar-priced commodities such as base metals costlier for holders of other currencies.
IS CHINA COMING BACK?
Raising some concern about soft demand in China, inventories of the metal in warehouses monitored by the Shanghai Futures Exchange have steadily increased since the beginning of the year.
Top copper buyer China consumes about 40 percent of the global output.
Inventories of the red metal in LME-monitored warehouses though fell by 925 tonnes to 273,000 tonnes, a fresh 2 1/2 year low.
“When you look at the total stocks picture, actually it is one that continues to tighten and provide support,” Berry said.
Offsetting some fear of a demand slowdown in China, the country's copper imports remained surprisingly strong in February with inflows of the industrial metal up 17 percent from January and double a year earlier.
The number of cancelled warrants, inventory already earmarked for delivery, at the LME was also a supportive factor, analysts said.
“Given the high level of cancelled warrants at the London Metals Exchange we would argue that underlying demand is healthier than many market participants believe,” Credit Suisse said in a note.
In other metals, tin was at $23,700 from $23,475 while zinc, used in galvanising was at $2,100.25 from $2,091 Monday's close.
Lead was at $2,158 from $2,138 and aluminium was at $2,238 from $2,229.
Nickel was at $19,450 from $19,260. - Reuters