Copper drifts to one-week high as focus moves to low inventories

Among other metals, LME aluminium CMAL3 fell 0.7% in official activity to $3,205.50 a ton and nickel CMNI3 lost 0.6% to $16,920 while zinc CMZN3 added 0.4% to $3,852, lead CMPB3 was little changed at $1,911.50 and tin CMSN3 rose 0.3% to $55,900.

($1 = 6.7232 Chinese yuan)

Copper prices edged higher on Tuesday to their highest in a week as investors focused on low inventories, shrugging off a stronger dollar and uncertainty about U.S. interest rates.

Benchmark three-month copper CMCU3 on the London Metal Exchange added 0.2% to $14,296 a metric ton in official open-outcry trading, having hit its highest since August 17, marking the third straight session of gains.

"The recent pullback in copper looks more like a cooling of an extreme squeeze than a deterioration in fundamentals," said Ewa Manthey, commodities strategist at ING.

"We expect near-term volatility to persist, but low inventories and ongoing supply concerns should continue to underpin copper prices."

Inventories in warehouses registered with the LME MCUSTX-TOTAL tumbled by nearly 50% in the 2-1/2 months until mid-August, prompting worries about supply, but stocks have since rebounded by 17%.

The squeeze in inventories sent the premium for cash LME copper over the three-month contract to a peak of $545 a ton on August 17, but that has since collapsed to $71.

Despite the rebound in copper inventories, available stocks remain low after metal owners gave notice they plan to remove a large amount, 55% of the total.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 edged 0.2% higher to 107,980 yuan ($16,060.80) a ton.