SHANGHAI (Dow Jones)--Base metals on the Shanghai Futures Exchange were mixed Thursday, with copper edging higher despite the latest rate hike overnight by China's central bank to rein in accelerating inflation.
Benchmark SHFE September copper settled 0.2% higher at CNY70,950 a metric ton.
After some initial price volatility due to concerns over a slowdown in the Chinese economy, copper spent the day in positive territory as the market digested the 25-basis-point increase in interest rates.
"The market had anticipated a rate hike for quite some time, so when the central bank finally announced it last night, investors were sort of relieved that further monetary tightening won't happen at least in the near term," said Everbright Securities Futures analyst Xu Yongqi.
Other analysts said higher lending costs may curb investment demand in hard assets, such as metals, but price movements may still depend on investors' confidence in overall economic growth, which is more closely tied with real demand for copper, a metal widely used in manufacturing, mass transit and construction.
Supply disruptions in Chile and Indonesia may continue providing strong support for copper prices in the short term, they added.
Standard Bank said in a note overnight that higher lending rates in China won't pose an immediate threat to commodity prices.
"Our analysis finds that a sustained negative effect on commodities, due to an increase in the lending rate, only occurs after a considerable lag (12-18 months)," the bank said, noting that for commodities, price declines in response to higher lending rates are usually short-lived.
Copper traded at the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, was quoted at CNY70,750-CNY70,800/ton, up from CNY70,600-CNY70,700/ton Wednesday.
Three-month London Metal Exchange copper ended Wednesday's afternoon kerb $15 lower at $9,520/ton.
It was quoted $0.5 higher at $9,565/ton around 0700 GMT, when the SHFE closed.
SHFE lead settled flat, aluminum lost 0.2% and zinc closed 0.2% lower.
Thursday's settlement prices in yuan a ton and LME late kerb prices from Wednesday in dollars a ton:
