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US copper futures ended at their highest levels in two months on Thursday amid concerns strike action in South America could place further strain on the market's already tight supply situation, traders and analysts said.
Copper for September delivery settled up 4.85 cents to $3.5935 a lb. at the New York Mercantile Exchange's Comex division, just shy from the top of its $3.53-$3.5985 trading band. This is the fifth straight day of gains, with the market riding a wave of momentum buying once prices were able to breach and sustain rallies above key chart points, traders said.
"The momentum is just continually building. We have cleared the first hurdle at $3.50 (a lb.), and are now just building and getting ready to attack the highs at $3.7790," said Larry Young, senior trader at Infinity Brokerage Services in Chicago.
Final estimated futures volumes totalled 15,019 lots, against on Tuesday's final count at 11,096 lots. Open interest in Comex copper futures increased 1,549 lots to 81,852 as of July 3. Fundamentally, possible strike action at one of the world's largest copper mines and ongoing disputes around the globe have provided the impetus for the most recent wave of speculative interest, analysts said.
"The possibility of further supply disruptions should keep the shorts from being very aggressive in the near term," Man Financial said in a daily market comment. Workers at Chile's 440,000-tonne a year Collahuasi copper mine failed to come to an agreement with management over a new contract on Thursday, leaving one more day for the two side to reach a deal.
If the union rejects it, a strike could start as on Monday. Elsewhere in Chile, subcontracted workers at Codelco, the world's biggest copper mining company said they will continue their strike for better pay and conditions but that talks with company officials offered hope for a solution.
In Mexico, miners and metalworkers walked off the job in a one-day strike on Thursday in protest over safety conditions and a long-running power struggle in the union. Group Mexico's huge Cananea copper mine was operating normally, despite the one-day work stoppage, senior union official Carlos Paved said on Thursday.
Overnight inventory data showed London Metal Exchange copper stocks declined 2,425 tonnes to 107,950 tonnes on Thursday, their lowest level since last October. Comex stocks were unchanged at 22,123 short tons on Tuesday.
An unexpected rise in the US service sector added to copper's bullish tone on Thursday, signalling a stronger economic growth. The Institute for Supply Management's services indexes rose to 60.7 from 59.7 in May. The median forecast among analysts polled by Reuters was 58.0. A number above 50 indicates growth. LME copper for delivery in three months ended up $35 to $7,860 a tonne from Wednesday's settlement.

Copyright Reuters, 2007

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