January 25, 2017 / 11:18 AM / 3 years ago

METALS-Chile strike fears help fuel copper's rise to two-month high

* Escondida strike vote Jan. 27-31

* Talk of China aluminium capacity cuts supports prices

* Chinese New Year holiday to subdue activity (Adds closing prices)

By Pratima Desai

LONDON, Jan 25 (Reuters) - Copper prices hit two-month highs on Wednesday lifted by worries about supplies from Chile due to the possibility of a strike, BHP Billiton cutting its forecast for copper output and a weaker dollar.

Benchmark copper on the London Metal Exchange ended little changed at $5,942 from $5,943 on Tuesday after earlier hitting a session high of $5,973.

Traders said BHP Billiton cutting its full-year copper output forecast by 2 percent had reinforced concerns about tighter supplies this year, but that the recent run higher had persauded some funds to take profits.

Unionised workers at BHP Billiton-run Escondida in Chile, the world’s biggest copper mine on Tuesday rejected the company’s latest wage offer and asked workers to vote for a strike and prepare for an extended conflict.

Workers at the mine, which produced 452,000 tonnes of copper in the six months to end-December, will vote on the proposal between Jan. 27-31.

“The news from Escondida has encouraged buying, there is an expectation the Chinese will pile back into copper after the New Year and the dollar is softer,” said Citi analyst David Wilson.

A lower U.S. currency makes dollar-denominated commodities cheaper for non-U.S. firms, potentially boosting their demand.

The Chinese New Year holiday from Jan. 27-Feb. 2 means subdued manufacturing activity and weaker demand for industrial metals.

Three-month aluminium closed down 1.8 percent at $1,833.5 a tonne from a 20-month high at $1,883 on Tuesday. It has been boosted by talk of output cuts in top producer China.

“As wintertime pollution surged in Beijing, news reports began circulating that winter production restrictions could spread from the cement and steel industries into aluminum,” JPMorgan analysts said in a note.

“Thirty percent of aluminum smelting and 50 percent of alumina refining capacity in Henan, Shandong and Shanxi provinces could be potentially affected ... the three provinces combined account for about 36 percent of the total current Chinese aluminum capacity.”

China’s aluminium production capacity is estimated at around 40 million tonnes. Analysts say the capacity cuts if approved would be rolled out for the next winter.

Lead fell 0.1 percent to $2,390 a tonne, but still near the six-week high of $2,394 hit on Tuesday. Expectations of stronger demand from car battery makers have boosted prices.

Zinc slipped 0.9 percent to $2,801, tin rose 0.1 percent to $20,425 and nickel ceded 0.9 percent to $9,700.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin (Additional reporting by Manolo Serapio Jr.; Editing by Louise Heavens and Elaine Hardcastle)

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