Copper rebounds as AI fears fade, but China shortages persist

Copper prices rose on Wednesday after falling in the previous session. The rebound came amid a recovery in investor sentiment about AI companies and shortages in top metals consumer China.

Benchmark three-month copper on the London Metal Exchange rose 1% to $13,796 a metric ton by 1025 GMT. It had lost 1.6% on Tuesday. Last week, it recorded its biggest weekly drop since March.

Much of the losses came from fears that the Democrats' sweep in the US midterm elections would lead to tougher AI regulation. That could curb demand in a fast-growing area for copper.

"Stock markets are rebounding so that's helping underpin metals prices. The tech sector hasn't collapsed yet and doesn't look like it wants to," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Stocks rose on Wednesday as investors focused on a renewed wave of AI optimism after strong results from AI infrastructure firm CoreWeave. "The stock market is allowing the market to refocus a little more on the fundamentals, which certainly still remain firmly supportive when we look at China."

Premiums have soared in China for spot physical copper cathode. Domestic smelter output fell, and arrivals of seaborne metal stayed limited. The Yangshan copper premium, which reflects demand for copper imported into China, the top metals consumer, stayed at a record $230 a ton for a third straight day.

LME aluminium rebounded 1.3% to $3,050 a ton after hitting a three-week low on Tuesday. Rising exports from China and hopes for an end to the conflict in the Middle East, a key production area for the metal, had hit prices.

Weakness in London pushed prices down overnight on the Shanghai Futures Exchange. There, aluminium prices touched an 11-month low. Falling aluminium stocks in LME-registered warehouses lifted the premium, or backwardation, on the near-term aluminium contract over the LME's three-month benchmark.

Among other metals, LME zinc rose 1.1% to $3,753 a ton, lead rose 0.1% to $1,879, nickel gained 0.9% to $16,170 and tin added 0.6% to $46,595. Exchange rate: $1 = 6.6742 Chinese yuan renminbi.