METALS-Tariffs loom, but weak dollar and China data boost copper

Updates prices

By Pratima Desai

LONDON, March 3 (Reuters) - Copper prices rose on Monday as a weaker dollar and stronger industrial activity in China raised hopes of stronger demand, though gains were capped by potential tariffs on U.S. imports.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was up 0.6% at $9,416 a metric ton at 1702 GMT.

A weaker U.S. currency makes dollar-priced metals cheaper for buyers with other currencies, potentially boosting demand.

The dollar fell further after data on U.S. manufacturing showed longer waiting times for material to be delivered, suggesting that tariffs on imports could soon hamper production. U.S. manufacturers rely heavily on imported materials.

U.S. President Donald Trump is planning to add another 10% tariff on Chinese goods on Tuesday, effectively doubling duties imposed on February 4.

China's economic health is crucial for base metals demand because the country is the world's largest consumer and relies heavily on these metals for its vast manufacturing sector.

"China's PMIs suggest demand may recover, but the tariff cloud is hanging over everything," one copper trader said.

China's official purchasing managers index (PMI) expanded in February after contracting the previous month after a solid rise in production, but the index for new export orders contracted.

"Traders are now looking ahead to China’s National People’s Congress for potential economic support measures, adding further optimism," Britannia Global Markets said in a note.

China's National People's Congress (NPC), scheduled for this week, is expected to announce more stimulus, given the looming tariff war and concerns over slow demand.

U.S. manufacturing activity data is also in focus, with expectations of expansion in February, but at a slightly slower pace than in January.

In aluminium, meanwhile, a large holding of 0#LME-WHC warrants and cash contracts have fuelled fears of tight supply on the LME market. It has also created a premium, or backwardation, for near-term contracts against those further along the maturity curve. 0#MAL:

Since the start of February, the cash aluminium contract has traded at a premium over the three-month contract CMAL0-3, compared with a discount, or contango, since April last year.

Aluminium CMAL3 was up 0.4% at $2,615 a ton, zinc CMZN3 gained 1.9% to $2,845, lead CMPB3 was little changed at $1,993, tin CMSN3 rose 1% to $31,685 and nickel CMNI3 was up 3.2% at $15,925.

Worries about tariffs on U.S. copper imports have fuelled a surge in COMEX HGH25 copper prices, which are up about 15% since the start of the year.