Falling stocks and a strike in the world's biggest copper producer, Chile, supported prices of the industrial metal on Thursday, although global economic concerns dragged on the market, analysts and traders said.
Mining equities were boosted by news that Rio Tinto had agreed to buy Canadian aluminium giant Alcan Inc for $38.1 billion, creating the world's biggest aluminium firm.
An influx of fund money into London Metal Exchange (LME) lead futures took the contract to a fresh record high of $3,035 a tonne, before ending the open outcry session at $2,980, level with Wednesday's closing price. The metal, mainly used in batteries, has gained 80 percent this year on fund buying and demand from China.
Copper for delivery in three months traded up to $7,990, slightly below Monday's two-month high of $8,015, before slipping to close at $7,826 in what traders at the LME said was short-term selling.
"In copper's case, another LME stock fall today and continued unresolved strike situations in Chile are supporting values," Man Financial analyst Edward Meir said.
Stocks fell below 100,000 tonnes for the first time in nearly a year in the previous session, and fell by another 725 on Thursday to 98,625, two days worth of world consumption.
A Goldman Sachs report forecast copper prices would trade around $7,500 a tonne over the next 12-18 months, while rival merchant bank Fortis said copper prices would stay between $7,500 and $8,000 in the short term. Labour disputes continued at two major copper mines in Chile, highlighting the critical stocks position.
At the 440,000-tonne-per-year Collahuasi complex a strike entered its third day after pay talks had stalled. In a separate strike, Codelco said operations at its Andina division would remain suspended until at least Thursday.
Operations were suspended on Monday, costing 700 tonnes a day of lost output, after a worker was injured. "If the strikes get settled quickly, further weakness will ensue, but it's clear that speculators are still keen on copper," Fortis said. The market had been under pressure from weakness in the equity markets earlier in the week, traders and analysts said, but metals have benefited from a weakening US dollar.
Concerns that growing US subprime mortgage woes could spread to the wider economy pushed the dollar to a fresh record low against the euro on Thursday. Rio's stock was down almost 5 percent on concerns it was paying a full price for Alcan, but other miners such as BHP Billiton and Anglo American rose on consolidation prospects, supporting Britain's top FTSE share index. Aluminium fell $36 to $2,800, down from Wednesday's six-week high of $2,836.
Analysts forecast cash aluminium prices would average $2,712 a tonne in 2007 in a Reuters poll on Wednesday, up 13 percent from forecasts at the start of the year.
Prices of most base metals were expected to fall from current levels as supply increases this year and next, but they will still be much higher than previously forecast, the poll of 28 analysts showed. Zinc gained $70 to $3,545 on falling LME stocks, while tin fell to $14,125 against $14,150/14,160 and nickel lost $150 to $33,200.
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