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Copper claws higher on physical demand, but jittery on rates

Copper prices were moving higher for a third session on Tuesday on signs of a rebound in physical demand, but gains were capped by uncertainty ahead of a U.S. central banking conference.

Three-month copper on the London Metal Exchange CMCU3 was up 0.7% to $9,340 a tonne by 1030 GMT, building on two previous sessions of gains, including a 2.6% rise on Monday.

“The market is suddenly looking stronger, we have buyers out there for the physical stuff, not just the financial players,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“But it’s pausing a bit today. Before we know whether we’ll see a strong return of investment demand, we need to get past Friday and Jackson Hole, that’s the next crucial event risk.”

Markets are awaiting more signals on stimulus tapering from the head of the U.S. Federal Reserve Jerome Powell, who is due to make a speech on Friday at the Jackson Hole meeting of central bankers.

The comments are likely to set the direction of the dollar, which has a big impact on copper and other commodity markets.

The dollar index =DLR was slightly firmer on Tuesday, making greenback-priced metals more expensive to holders of other currencies. FRX/

The most-traded October copper contract on the Shanghai Futures Exchange SCFcv1 closed up 1.5% at 68,560 yuan ($10,582.86) a tonne.

* Signs of renewed physical demand for copper included China’s Yangshan premium SMM-CUYP-CN, which has more than doubled this month to $122.50 a tonne.

* LME on-warrant inventories MCUSTX-TOTAL have slid by a fifth over the past two days while the premium of LME cash copper over the three month contract CMCU0-3 has jumped to $27.95 a tonne, the strongest since April, indicating more demand for near-term supplies.

* Prices for aluminium raw material alumina have hit their highest in almost six months after a blaze at the Jamalco refinery in Jamaica led to fears of tighter supply.

* LME aluminium CMAL3 rose 0.9% to $2,624.50 a tonne, zinc CMZN3 gained 1.4% to $2,970, lead CMPB3 dropped 0.4% to $2,275, nickel CMNI3 climbed 0.7% to $19,025 and tin CMSN3 advanced 2.1% to $32,890.

* For the top stories in metals and other news, click TOP/MTL or MET/L
Source: Reuters (Reporting Eric Onstad; Additional reporting by Mai Nguyen in Hanoi; editing by Jason Neely)

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