Copper rallies as Chinese buyers return to the market, dollar softens

The dollar rose after the US Federal Reserve raised interest rates and reaffirmed its commitment to curbing inflation. But later in the session it retreated as oil prices extended their decline.

A softer US currency makes dollar-priced metals cheaper for holders of other currencies, which would boost demand.

Chinese buyers are back though volumes are not "massive", said Alastair Munro, senior base metals strategist at Marex. He said Chinese demand was real physical buying, not just speculation.

Strong physical demand in the top consumer can be seen in the Yangshan copper premium, a gauge of Chinese demand for copper imports, which rose 2.5% to $121 a ton on Thursday, its highest level in almost four years.

It is also reflected in higher domestic physical market premiums, paid over the prices traded on the Shanghai Futures Exchange, which climbed to 645 yuan a ton on Wednesday, its highest since December 2023.

Adding to the angst are Chinese stocks in warehouses monitored by ShFE at 54,780 tons, the lowest since January 2024, partly due to traders and producers shipping metal to the United States on the expectation of import tariffs.

The flow of copper to the US is also why stocks in LME warehouses have dropped since February last year when President Donald Trump first talked about a levy on imports.

Elsewhere, zinc CMZN3 climbed 2.0% to $3,888.50 a ton after reports of an industrial accident at Korea Zinc's Onsan smelter raised concerns about supply.

In other metals, aluminium rose 1.1% to $3,304.50, lead gained 1.3% to $1,910, tin CMSN3 advanced 1.5% to $53,205 and nickel CMNI3 added 0.8% to $16,295.

Copper prices rallied on Thursday as Chinese buyers returned to the market after a recent selloff while demand prospects brightened and the dollar softened.