(Updates prices)
LONDON, Feb 17 (Reuters) - Copper fell on Friday as
expectations of higher U.S. interest rates strengthened the
dollar, but prices remained on course for their first weekly
gain in four weeks thanks to signs of recovering Chinese demand.
Benchmark copper on the London Metal Exchange (LME)
was down 0.3% at $8,995 a tonne at 1709 GMT but up 1.5% over the
week.
Prices of the metal used in electrical wiring hit a
seven-month high of $9,550.50 in January as the dollar weakened
and speculators bet that the Chinese economy would revive.
But the rally lost momentum as the dollar regained ground,
making metals costlier for buyers with other currencies, and
inventories piled up in Chinese warehouses.
Credit being pumped into China's economy should boost growth
and copper consumption, said Dan Smith, head of research at
Amalgamated Metals Trading.
He said that copper supply and demand should accelerate,
predicting a market deficit of about 200,000 tonnes this year
and prices above $10,000 a tonne by the end of June.
"I think we're going to go lower in the next few days," he
said. "(But) I'm bullish from a 3-6 month perspective."
Stock markets dropped on Friday and the dollar leapt to
six-week highs as jobs data revived expectations of further
increases to U.S. interest rates, which also sent oil prices
down 3%. In China, the pace of copper inventory build-up slowed, with
stocks in Shanghai Futures Exchange warehouses rising 3% to
249,598 tonnes in the week to Friday. Yangshan copper import premiums increased this week for the
first time since November, suggesting improved Chinese demand.
They were last at $24.50 a tonne. The market also faces lost copper production.
First Quantum Minerals warned employees it may have
to shutter operations in Panama and Freeport-McMoRan's Grasberg mine in Indonesia is not expected back online until the
end of March after heavy rains and landslides.
LME aluminium was down 0.3% at $2,388 a tonne, zinc rose 2.1% to $3,065, nickel fell 2.6% to
$25,800, lead gained 2.1% to $2,072 and tin was
down 4.1% at $25,905.
All except zinc were heading for weekly falls.
(Reporting by Peter Hobson
Additional reporting by Siyi Liu and Dominique Patton
Editing by David Goodman, Kirsten Donovan)
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