Copper futures in New York rallied 3 percent, or 10.80 cents, on Wednesday as speculative buying boosted prices to a four-week peak on concerns that this week's strike at Chile's Escondida copper mine may drag on longer than expected, sources said.
"The market kind of 'hemmed and hawed' off the Escondida situation, but it now looks like it has made up its mind that yes, shutting the world's largest copper mine is bullish," a New York-based trader said. Copper for September delivery settled up 10.80 cents at a 3-1/2-week peak at $3.71 a lb on the New York Mercantile Exchange's Comex division.
Trading ranged from low at $3.5580 to a four-week high at $3.7320. Technicians pegged next resistance in September copper at the July 12 peak at $3.77 followed by the life-of-contract peak at $3.94.
First support was seen at around the $3.50 level. Spot August shot up 12.30 cents to finish the day at its session peak at $3.7440 a lb. Comex final copper volume was estimated at healthy 24,000 lots, against on Tuesday's official count at 16,447 lots. Comex copper futures held to range-bound dealings in the part of the trading session, but charged higher, hitting buy-stop orders above the $3.69-$3.70 level, floor dealers said, after news that the striking union at Escondida planned to call off talks scheduled for Wednesday afternoon with mine owner BHP Billion.
The company had declared force major on delivery of copper concentrates after the strike began on Monday, cutting production at the mine by 60 percent.
Escondida accounts for almost 8 percent of global copper production, 20 percent of Chilean copper output and 2.5 percent of the country's gross domestic product.
The market had a delayed reaction to the announcement of the strike on Monday, as traders digested the news and overall nervousness over a global economic slowdown outweighed the bullishness of the loss of production.
"You don't always know immediately how much support the strike will have, how much production will be limited and then the duration of the strike is certainly the other key variable here," said one market analyst.
"But, this is a market that really doesn't have all that much inventory on its hands that it can afford to sit back and take a 'wait and see' approach when in actuality, the market is basically living hand to mouth," he added.
Looking at the tight supply situation, London Metal Exchange (LME) stocks increased by 2,075 tonnes to 104,750 tonnes on Wednesday, while Comex inventories held steady at 6,756 short tons on Tuesday's daily report. LME three-month copper ended up 1.7 percent or $140 to $8,030 a tonne, after dealing between $7,740 and $8,095.
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