Copper rebounds despite surge in LME inventories

LONDON, Jan 24 (Reuters) – A sharply weaker dollar helped copper prices to rebound on Wednesday from a one-month low despite a second day of rapidly rising inventories that suggested there is plentiful supply of the metal used in power and construction. Benchmark copper on the London Metal Exchange traded up 0.9 percent at $6,987 a tonne in official rings after plunging by 2.1 percent on Tuesday to $6,885, its lowest since Dec. 19. On-warrant copper stocks available to the market in LME-registered warehouses jumped by 24,325 tonnes after a rise of 44,825 tonnes on Tuesday, taking the increase in on-warrant inventories since Jan. 17 to 51 percent. Traders said after Tuesday’s big rise that further increases had been expected. “We see big stock increases all the time at various points. The market has been talking about it for a couple of weeks (and), because of this, doesn’t see it as an issue,” one trader said. He also said copper had been supported by Chinese investors cashing in bets on lower prices and the strength of the euro against the dollar, which was fuelling demand. TECHNICALS: Copper was holding just above its technically important 50-day moving average at about $6,941 a tonne. “We need copper back above $7,075 for a turn in the downward trend,” a trader said. CHINA: The rise in LME stocks could reflect weaker import demand from China, analyst Helen Lau wrote in a note. China imported 450,000 tonnes of unwrought copper in December, down 6.9 percent year on year, while its refined copper output hit a record high of 865,000 tonnes. DOLLAR: Metals received support from a weaker dollar index , which slipped to a three-year low on fears of U.S. protectionism, making metals cheaper for holders of other currencies. GLOBAL GROWTH: The global economy is expected to grow at a robust pace this year, a Reuters poll showed, bolstering expectations of solid demand for metals. NICKEL: Nickel broke above a long-term downtrend line from its 2011 high, triggering technical buying. Expectations of increased demand for nickel in batteries used to power electric vehicles has driven the stainless steel ingredient to 2-1/2 year highs. It did not trade in official rings but was bid up 1.2 percent at 13,000 a tonne. STOCKS: On-warrant stocks of nickel in LME warehouses fell to 252,960 tonnes after 6,690 tonnes of cancellations, helping to support prices.