London - Copper rose on Tuesday, recovering from a three-year low, after China's central bank sought to soothe fears that a credit crunch in the world's top metals consumer will crimp the country's growth.
China's central bank said earlier that it would guide market rates to reasonable levels, and it expected that seasonal factors that caused a recent spike in interbank market rates would gradually fade.
China accounts for around 40 percent of global refined copper demand.
The dollar's retreat off recent peaks also helped to bolster copper, as metals priced in the greenback are cheaper for European and other non-US investors.
Two Fed officials said late Monday that an imminent end to US monetary stimulus was not on the cards.
Benchmark three-month copper on the London Metal Exchange rose 1.27 percent to $6,755.50 a tonne by 11:11 SA time, having earlier hit a intra-day low $6,602, its weakest level since July 2010.
“China's central bank, having given a jolt of reality to the shadow banking sector, are making soothing noises today. (And) in the case of China, what the authorities say tends to result in action,” said BNP Paribas analyst Stephen Briggs.
“On a 6-12 month view, we're going to see lower numbers. Copper has moved from years of deficit to an extended period of surplus and the price even now is more above cost of production than for other base metals,” he added.
Copper hit a three-year low on Monday on worries that China's central bank is engineering a tightening of cash in a bid to rein in excessive credit growth, and on fears about a scaling down of US monetary stimulus.
Copper, a key indicator of industrial demand, has fallen about 15 percent this year.
Credit Suisse on Tuesday cut its 2013 average copper price forecast to $7,240 a tonne from $7,482, while Deutsche Bank cut its 2013 average copper price forecast by 4 percent to $7,547 a tonne.
Copper also took a hit on Monday on news that Freeport McMoRan Copper and Gold Inc was ramping up output at Grasberg in Indonesia, six weeks after a deadly tunnel collapse at the world's No. 2 copper mine halted operations.
The resumption of open-pit operations at Grasberg came much earlier than the market expected, taking traders and analysts by surprise.
Reuters technical analyst Wang Tao said LME copper is expected to fall to $6,149 per tonne over the next three months, driven by a powerful wave C.
In other metals traded, stainless-steel ingredient nickel rose 1.48 percent to $13,832 a tonne, having earlier hit $13,525 a tonne, its lowest point since May 2009.
China's nickel-pig-iron (NPI) producers are facing growing consolidation threats due to low nickel prices and export curbs from producing countries, Jinchuan Group Ltd said earlier. - Reuters