Copper prices rallied to their highest in over a year on Monday, shrugging off a 40 percent fall in China's refined copper imports in October as a weaker dollar and gains in other commodity markets dominated sentiment. "The market had probably priced in much of a fall like this but it goes to show just how much the dollar influences these things," ANZ's senior commodities analyst Mark Pervan said.
"But there is a risk that people may unwind the long commodities-short dollar trade and that could make for a reasonable correction, perhaps a 10-15 percent fall over the three weeks before year end." Three-month copper on the London Metal Exchange rose $165 or 2.4 percent to $7,010 a tonne by 0740 GMT, its highest since September 2008, while the dollar dropped 0.9 percent versus the euro to $1.4968.
Other commodities also rose with gold hitting a new record high, and oil up 1.3 percent, Benchmark third-month Shanghai copper rose 2.5 percent to 55,020 yuan, and earlier touched a fresh 14-month high of 55,060 yuan. China's refined copper imports in October fell 40 percent to 169,000 tonnes, or 60,000 tonnes below initial expectations.
"We haven't seen a price reaction to the weak import numbers yet and I would have expected them to dampen prices," Barclays Capital analyst Yingxi Yu said. "Easing Chinese imports will be an obstacle for prices in the short term. The market is running ahead of itself and there is reason to expect a pullback."
China's apparent demand for refined copper fell 20 percent in October to just over 544,000 tonnes as imports slowed, exports rose and stocks ballooned towards five-year highs, Reuters calculations based on official data showed. Supply issues were also at the forefront. Workers at BHP Billiton Spence deposit in Chile voted to end a six-week strike over pay.
Over the weekend workers at the Andina copper mine approved a wage offer from owner Codelco, a union leader said. But miners at Codelco's massive Chuquicamata copper mine are seeking a 7.5 percent wage hike in negotiations that should conclude in late December. Chuquicamata produced 315,000 tonnes of copper in 2008. "The labour situation in Chile is quite dynamic - as one threat recedes, another rears its head," a trader in Hong Kong said.
"It's causing a little bit of nervousness, especially at Chuqui - a prolonged strike there would take a big chunk of material out of the supply chain." Zinc rose 2.7 percent in London and 3.1 percent in Shanghai to trade at $2,315 and 18,525 yuan respectively - an 18-month high for the Shanghai contract, while London hit its highest since the end of October.
Mining group Minmetals needs to conduct a battery of tests along its damaged Australian zinc concentrate pipeline before setting a date to restart shipments from its Century mine, the firm said. The mine, the second largest of its kind in the world and accounting for a third of Australia's total zinc output, ran out of concentrate at its shipping port last week, prompting buyers to look for alternative sources. The loss of supply from Century has helped lift zinc prices 18 percent since the start of October.
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