Copper futures in New York ended up 2.3 percent on Friday, boosted by news that the massive Escondida copper mine in Chile had halted operations and abandoned labour talks with union workers, now in a 12-day strike, sources said.
"We're already in a tight market and for a mine like this to suspend its operations just amplifies the limited supply in this market," said one broker at a New York trading house.
Copper for September delivery closed 7.70 cents firmer at $3.4345 a lb on the New York Mercantile Exchange's Comex division, after dealing between $3.3510 and $3.4645.
Chartists pointed to the $3.21 low from July 24 as support, while they pegged resistance at the $3.77 high from July 12. December copper gained 8.30 cents at the close to $3.3980, near the upper end of its $3.31-$3.4250 trading band. Spot August rose 6.70 cents to $3.45. Comex final copper volume was estimated at 17,000 lots, in line with the 16,178 lots recorded on Thursday.
Escondida, the largest copper mine in the world, suspended operations and broke off talks with the union late on Thursday because workers had illegally blocked access roads to the mine for two days and had put at risk the health and security of people working there.
"The company wants to maintain its operational continuity and renew operations as soon as possible, as soon as the police can insure the full safety of people who work in the company," Escondida said.
Union president Luis Trounces told Reuters the company was trying to weaken the union when it does not have any more ore to process anyway. "After the 15th day (of a strike) the company can negotiate individually with the workers. They know they don't have any more production in the mine at this moment, so the only way out for them right now is to halt operations," Trounces said.
He was referring to Chilean labour law, which allows individual workers to go back to work if a union strike goes on more than two weeks and to make their own deals with the company.
On the economic front, relatively tame readings of consumer and producer price inflation this week, as well as a slowing US housing market weighed on the upside momentum as some analysts predicted a slowdown in the US economy could in turn hinder demand for industrial metals.
"The market is probably a little overdone given some of the weakness in high consuming areas of the economy of copper, particularly in the housing," said one.
On the supply side, London Metal Exchange (LME) inventories shot up 6,125 tonnes to 121,800 tonnes on Friday, while Comex inventories were down 199 short tons at 6,955 tons as of Thursday.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 7 percent, or by 3,441 tonnes, to 54,516 tonnes in the week ended on Thursday. LME three-month copper settled at $7,450, up $160 from Thursday's kerb close.
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