LONDON: Copper prices rose on Wednesday, bouncing back from a sharp decline in the previous session, as investors focused on tight inventories outside the US, even as questions lingered over demand. Benchmark three-month copper on the London Metal Exchange was up 1percent at USD12,875 per metric ton in official open-outcry activity, after closing down 1.6percent on Tuesday. The metal, which is widely used in the power, construction and manufacturing sectors, hit a record high of USD13,407 one week ago.

“While the broader base metals complex remains volatile, structural tightness continues to underpin prices,” Neil Welsh, head of metals at Britannia Global Markets, said in a note.

The premium of the cash LME copper contract over the three-month forward spiked to more than USD100 a ton on Tuesday, indicating strong demand for near-term metal, but had eased to USD11.50 a ton on Wednesday.

Dan Smith, managing director at Commodity Market Analytics, said markets were “nervous” about the global geopolitical situation after US President Donald Trump threatened to impose tariffs on European allies opposed to his goal to gain control of Greenland.

“I’m a bit dubious about this bounce,” Smith said of copper, adding that his algorithm was now giving him a sell signal. “It suggests any kind of strength will be short-lived.” The recent price rally is also hurting demand in China, the top metals consumer.

The Yangshan copper premium, a gauge of Chinese appetite for copper imports, fell to USD22 a ton on Wednesday, the lowest price in almost 18 months. “China macro looks pretty strong, but high copper prices tend to weaken demand if you’re not careful,” Smith said. China, meanwhile, exported another 96,000 tons of refined copper in December, down around one-third from November’s bumper shipments but still more than five times higher than a year earlier.

Tin was the top gainer, adding 5.6percent to USD52,200 a ton as Indonesia cracks down on illegal mining, while nickel jumped 2.5percent to USD18,055. Aluminium rose 0.5percent to USD3,122.50, zinc gained 0.9percent to USD3,200 and lead climbed 0.3percent to USD2,033.50.—Reuters