Copper prices strengthened on Monday, bolstered by a weaker dollar and improved manufacturing data from China, although concerns over demand due to rising inventories limited gains. Traders noted that the depreciating US currency, which makes dollar-priced metals more affordable for holders of other currencies and potentially stimulates demand, led to a surge in copper purchases by funds. Benchmark copper on the London Metal Exchange (LME) rose 0.6% to $9,615 per metric tonne by 1110 GMT. The metal, used extensively in power and construction, has fallen over 10% from its peak of $11,100 in May.

"Funds are propping up copper prices, but a lasting recovery hinges on fundamental improvements," commented a copper trader. A private survey indicated that smaller Chinese manufacturers experienced their fastest growth in factory activity since 2021, driven by overseas orders. However, this optimism was offset by a broader survey showing weak domestic demand and industrial contraction. Copper stocks at LME-registered warehouses have surged nearly 75% to 180,050 tonnes since May 16, reaching their highest level since December. Meanwhile, stocks in Shanghai's bonded warehouses have risen from approximately 9,000 tonnes in January to 90,700 tonnes.

"We anticipate ongoing price pressures due to weak demand in China, particularly in traditional sectors like construction, and expect further inventory increases in LME warehouses," stated BNP Paribas analyst David Wilson. "We also predict the nickel price will decline through the second half of 2024, ending the year at $16,750/t, due to increasing oversupply and continued inventory growth." LME nickel stocks have more than doubled to 95,436 tonnes since early November. Nickel prices edged up 0.1% to $17,315. Among other metals, aluminium increased 0.3% to $2,531, zinc rose 0.9% to $2,962, lead gained 0.1% to $2,227, and tin advanced 0.8% to $32,995.