Copper bounces from 3-week low; Fed decision in focus

Copper rebounded slightly from a three-week low on Wednesday, despite expectations of a US Federal Reserve interest rate hike later in the day. The three-month copper price on the London Metal Exchange surged 0.53% to $14,158 per metric ton by 0330 GMT, following a drop to $13,926 the previous day. The Shanghai Futures Exchange's most-traded copper contract climbed 0.64% to 107,610 yuan ($16,037.97) per ton.

Markets were pricing a more than 90% likelihood of a 25-basis-point Fed rate increase, up from roughly 60% a week ago, due to persistent inflation. Higher interest rates generally dampen economic expansion, a potential challenge for industrial metals. The US dollar approached a two-week peak, while oil prices stayed above $100 per barrel, exacerbating inflation worries.

Jinrui Futures, a Chinese brokerage, cited reduced treatment costs, sluggish smelter margins, and dwindling inventories as factors supporting copper prices. Emerging signs of stronger physical demand in China's largest market added to the positive outlook. The Yangshan copper premium, indicative of Chinese demand for imported copper, hit $110 per ton on Tuesday, the highest level since early August.

However, rising warehouse inventories tempered the upward momentum. Copper stocks in LME-registered storage climbed to 249,225 metric tons as of Monday, while cash copper remained below the three-month contract price. US COMEX copper reserves also increased for the second day in a row, reaching 768,098 short tons (approximately 696,807 metric tons) as of Monday.

Among other LME metals, aluminium climbed 0.20%, zinc rose 0.46%, lead advanced 0.59%, and nickel surged 0.77%. On the Shanghai Futures Exchange, aluminium increased 0.52%, zinc gained 0.56%, lead added 0.41%, tin rose 1.23%, while nickel fell 1.35%.