London Metal Exchange (LME) copper futures fell slightly in Asia on Friday, but were firmly supported by tight supply conditions that drew bargain-hunting from fund operators. Copper also gained support on talk that the Chinese government was looking to increase its reserves of the metal, keeping spot prices on both the LME and Shanghai market buoyant, traders said.
But the market was reluctant to push up the key three-month contract above $3,000 per tonne amid wariness over holding fresh positions above that level after plunges in mid-October, they said.
The market was also lacking speculative bids, as some players in the United States and Europe were less enthusiastic about taking new positions ahead of year-end bookclosings.
"Sentiment is very strong after seeing constant draws in copper stocks and wariness over labour strikes giving solid support to the market," said an LME metal trader at a Japanese trading house.
LME warehouses and inventories fell below 70,000 tonnes for the first time since July 1990 to 68,625 tonnes as of Thursday. When other exchanges are taken into consideration Comex and Shanghai reported stocks world-wide amount to about 140,000 tonnes.
This compared with about 800,000 tonnes at the beginning of this year after peaking at 1.5 million tonnes in April 2002. The current levels are less than two weeks of global consumption.
Concerns over supplies were increasing due to a weeklong strike at the Chilean copper mine El Abra, which is majority owned by US-based Phelps Dodge Corp Union leaders said the strike has cut output at the mine by 25 percent, but a mine official said on Thursday that production of copper in cathodes has risen since the strike started.
The three-month LME copper futures contract stood at $2,979/$2,986 per tonne against $2,988 in London on Thursday. In Shanghai, the most active January copper futures rose 420 Yuban a tonne to 29,130 yuan.
Copper and other metals were supported as the weaknesses of the dollar were attracting investor demand for hard assets. But recent sharp gains in the Wall Street stocks were increasing views that hedge funds could shift their portfolios into equities from commodities.
Other LME metals were little changed.
The key three-month LME aluminium was at $1,788/$1,791 per tonne against $1,787 in London. The most active Shanghai aluminium futures rose 20 yuan to 15,680 yuan.
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