Metals - Copper posts further gains as fresh supply fears loom, inventories fall

Metals - Copper posts further gains as fresh supply fears loom, inventories fall

	Published : Fri, 13 Apr 2007 13:01 By : Agencies Print this Story

LONDON (Thomson Financial) - Copper prices rose in morning trade, building on this week's strong gains, on fresh supply fears after a strike threat at the world's second largest copper mine in Indonesia, and as stockpiles fell for a fifth consecutive day.

At 12.29 pm, copper for three-month delivery stood at 7,770 usd per tonne, against 7,690 usd at the close yesterday. The metal yesterday hit an intraday seven-month high, before falling victim to profit taking.

Copper was buoyed this morning by supply fears, after workers at the world's second largest copper mine, operated by US mining giant Freeport McMoRan Copper & Gold Inc, threatened to strike.

Workers at the Grasberg mine in Indonesia are planning to demonstrate next week over wages and employee benefits, possibly disrupting production.

Separately, the UK's Xstrata said its Xstrata Copper division has delayed two shipments from its Bajo de la Alumbrera mine in Argentina from April to May because of flood damage to the port.

The news outweighed reports from Chile, the world's largest producer of the orange metal, that the state copper miner Codelco has reached agreement with workers who had blockaded its Chuquicamata mine.

Concerns over output disruption at the mine sent copper higher yesterday.

Prices were also supported by further draws on LME stockpiles, with stocks declining a further 250 tonnes today to 174,300 tonnes, according to data released this morning.

Rising prices are a continuation of the metal's bull run from February, which followed the end of a period of destocking by China, Basemetals.com analyst William Adams said.

'There has been a realisation that that destocking did not signify a slowdown in demand,' he said. 'Stocks are much tighter now, and as we go into the strong second quarter, we will see a pulldown of more visible stockpiles.'

In the medium to longer term, sentiment remains bullish. 'Over the next few months, new highs above 8,800 usd, even towards 9,000 usd, are possible,' said Adams.

Meanwhile, aluminium gained slightly to 2,851 usd, up from 2,835 at yesterday's close.

UBS said in a report this morning it remains bullish for aluminium over the longer term, and that the metal is its 'best medium and long-term buy'.

'Power issues and marginal costs will remain key factors in this market, with question marks remaining over whether new smelter construction would keep pace with demand growth,' the investment bank said in a note.

Global aluminium inventories are falling, currently amounting to 3.8 weeks' supply compared to 6.1 weeks at the beginning of 2003, it added.

Nickel meanwhile rose to 48,305 usd per tonne, after closing yesterday at 46,400 usd.

Among other metals, zinc edged up to 3,535 usd, having closed at 3,510 usd yesterday, lead rose to 2,005 usd from 1,980 usd, and tin reached 14,300 usd after closing at 14,250 usd.

jan.harvey@thomson.com

har/as/ro

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