Copper prices rallied on Wednesday, a day after the metal lost 1.3 percent, and dealers said the market would remain supported by worries over global supply disruptions and dwindling inventories.
London Metal Exchange copper for delivery in three months was up $31 from Tuesday's London close at $5,573/$5,580 a tonne. "There was some buying for LME copper and at the same time selling for Shanghai copper by Chinese traders," said a Shanghai-based metals dealer.
The arbitrage was prompted by short covering in the Shanghai market which pushed Shanghai copper futures higher despite an overnight decline in London, he said. On Tuesday, LME copper fell $73 to close at $5,542 in London.
It hit a record $5,616 on Monday on fund buying. "The market is in a consolidation mode after on Tuesday's losses but seems to be well supported by consumer buying," another trader said.
Prices for copper, which is used in construction and electronics, have risen four-fold from below $1,400 in November 2001 on strong demand from China, continued supply disruptions and historically low stocks after years of under-investment in new mining projects.
On Tuesday, LME stocks fell 4,475 tonnes to 116,200. LME copper stocks were about 800,000 tonnes three years ago. On the supply side, striking Mexican miners and steelworkers on Tuesday called on President Vincent Fox to intervene in an 11-day-old dispute.
The mining and metal workers' union said it would insist on the "direct and personal intervention" of Fox to uphold the legality of the strikes and for an embattled union leader to be recognised as its representative.
Strikes at Grupo Mexico's giant La Caridad copper mine in the northern state of Sonora and at other mining units of the company received the support of steel workers this week. The most active Shanghai contract, June, ended the session at 51,850 yuan ($6,476) a tonne, up 90 yuan from the previous close. It hit a new high of 52,200 yuan on short covering.
"Overall trade was quiet as most players stayed on the sidelines to wait for direction from investment funds," said Sheen Haihua, vice president of Maike Futures in Shanghai. LME aluminium rebounded to $2,474/$2,479 a tonne after losing $57 on Tuesday to close at $2,463.
Shanghai's most active aluminium contract, June, closed the session at 19,970 yuan a tonne, down 90 yuan from the previous close. In other LME metals, zinc was at $2,716/$2,726 a tonne, up from the London close of $2,690.
Zinc, used as an anti-corrosive coating in galvanised steel production, hit a record high of $2,750 on Monday. LME zinc stocks fell another 1,600 tonnes to 279,000. At the end of last year, LME zinc stocks were just below 400,000 tonnes. Zinc prices have risen 44 percent this year due to a shortage of zinc concentrates amid growing demand.
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