Lme Copper Extends Rally In Asia

London Metal Exchange (LME) three-month copper slightly extended its current rally on Thursday in Asian trade on news that union workers at Chiles Escondida copper mine had voted to continue their strike.

Copper prices seem to be firm today mainly due to the strike news at Chiles Escondida mine, a trader in Seoul said. Three-month copper was trading at $2,375 a tonne at 0300 GMT, up from the LMEs close on Wednesday at $2,372.

A union official at Escondida said early on Thursday morning that the workers had voted 131 to 127 to accept a company wage offer but the margin was not enough to end the dispute and the strike will continue.

 

The 358 unionised workers at Escondida began their industrial action on Friday to demand wage increases. The rest of the mines 2,000-strong workforce has not joined the strike. The 800,000-tonne-a year mine is owned by Broken Hill Proprietary Co Ltd (BHP) and RTZ-CRA.

However, some traders shrugged off the Escondida news saying it has already been reflected in the copper market.

Recent gains in copper prices have been backed by short-covering rather than the strike news at the Escondida mine, said a trader at a major commodity house in Seoul.

Some traders are believed to have large short positions and are said to be unwinding those positions, he added.

The benchmark cash/threes spread was bid up to $160 backwardation by Wednesdays close, up from $100 a day ago. Some of the current tightness could be from players who rolled over short positions for three months to May from February when the backwardation widened out to $300 a tonne in late January, traders said.

On Wednesday, Comex copper hit a six-week high which US traders said was due to concerns over physical tightness and a clutch of potential supply problems.

In addition to Escondida, the Kennecott smelter in Utah will stop producing blister for another five weeks, and the United Steelworkers and Phelps Dodge appear no nearer to agreement on a new Chino mine labour deal ahead of meetings on Thursday and Friday.

Traders said aluminium prices on the Tokyo Commodity Exchange (Tocom) rose on Thursday due to overnight gains on the LME and support by strong copper prices.

Tocoms benchmark February aluminium contract rose to 209.0 yen per kg at 0530 GMT, up 1.5 yen from Wednesdays close of 207.5 yen.

There was some hedge buying from trading houses in dull trading, said a trader at Japanese broker Okachi and Co Ltd.

LME broker Brandeis said in its daily report that three-month aluminium prices should continue to consolidate in a range between $1,580 and $1,625.

Nearby support was given by the 100-day moving average (MA) at $1,598 and nearby resistance was seen at the 30-day MA at $1,615.

A trader with LG Futures said LME copper and aluminium stocks are expected to fall further later on Thursday. However, he did not estimate the size of the declines.