LONDON - Copper prices fell on Wednesday as investors worried about the strength of economic growth and metals demand and braced for US inflation data that could impact interest rates.

However, losses were limited by supply concerns as inventories in London Metal Exchange (LME) warehouses plunged to 56 800 t, the lowest since 2005. 

Benchmark LME copper CMCU3 was down 0.5% at $8 808/t at 10:32 GMT.

Prices of the metal used in electrical wiring have drifted from a seven-month high of $9 550.50 in January as rising interest rates stifle economic activity and spread turmoil through the banking sector.

"It's a difficult outlook," said independent analyst Robin Bhar. "We may have very slow economic growth over the next decade and we still don't know the fallout from the banking crisis."

But he said low inventories would keep a floor under prices and electrification would boost demand over time: "I see record prices but perhaps not this year. Maybe next year, or the year after."

World stock markets and bond yields stalled amid bets that a high inflation number would bolster the case for another US interest rise next month. 

Meanwhile, the International Monetary Fund warned that lurking financial system vulnerabilities could erupt into a new crisis.

Copper's fundamentals have also softened in recent weeks.

China's copper cathode output rose by 14% year-on-year in March, according to researchers Antaike, and an official in Peru said the country expects to produce 2.8 million tonnes of copper this year, almost 15% more than in 2022.

China's economic recovery appears to be slowing.

"Data for early April points to a potential turning point, with order levels slackening and utilisation rates at wirerod plants finally coming down," said metals brokerage AMT.

LME aluminium CMAL3 was down 0.3% at $2 295.50 a tonne, zinc CMZN3 fell 0.6% to $2,740.50, nickel CMNI3 slipped 1.5% to $23 110 and tin CMSN3 was down 0.5% at $23 605. Lead CMPB3 rose 0.8% at $2 103.50 a tonne.