Recast to focus on copper prices falling; updates prices by Asian market close

May 12 (Reuters) - Copper eased from a more than three-month high on Tuesday as crude oil prices advanced with Middle East peace deal hopes fading on Trump's rejection of Iran's proposal, and traders weighing incoming U.S. inflation data.

Economists expect the largest annual increase in U.S. inflation in two and a half years, which would dampen hopes for the Federal Reserve to cut interest rates.

The benchmark three-month copper CMCU3 on the London Metal Exchange declined 0.41% to $13,894 a metric ton as of 0725 GMT, after touching an over three-month high of $13,983 earlier in the day.

The most-active copper contract SCFcv1 on the Shanghai Futures Exchange, closed 2.10% higher at 105,510 yuan ($15,528.28) a ton, paring gains from a level of as much as 108,400 yuan, a more-than three-month high, set earlier in the day.

Oil prices advanced as hopes for a Middle East peace deal faded, keeping concerns over energy supply and inflation alive. Brent crude LCoc1 sustained above $105 a barrel.

Traders will also monitor U.S. consumer inflation data due later on Tuesday. In the 12 months till April, the CPI is projected to have advanced 3.7%, which would be the largest annual increase since September 2023 and could reinforce expectations that the Federal Reserve will keep interest rates unchanged for longer.

Still, copper’s Shanghai rally showed that investors remained focused on supply risks. Traders cited lingering concern over concentrate tightness though Freeport-McMoRan pushed back against reports of a further delay at its Grasberg mine in Indonesia.

Traders also pointed to Peru, the world’s third-largest copper producer, after its government authorised state-run Petroperu PETROBC1.LM to seek $2 billion in state-backed loans to sustain operations, which they said raised concern that fuel-supply stress could affect mine logistics in the country.

Expectations that China’s refined copper imports could rise in the second quarter also supported prices, citing firm demand and slower domestic output during smelter maintenance.

Among other metals on the LME, aluminium CMAL3 lost 0.84%, zinc CMZN3 dipped 0.19%, lead CMPB3 dropped 0.33%, nickel CMNi3 shed 1.63% and tin CMSN3 tumbled 1.32%.

Elsewhere on SHFE, aluminium SAFcv1 added just 0.04%, zinc SZNcv1 climbed 1.06%, lead SPBcv1 dropped 0.69%, nickel SNIcv1 lost 1.19% and tin SSNcv1 rose 0.27%.

($1 = 6.7947 Chinese yuan renminbi)