Copper closed lower on Monday after a major wage deal, having risen to its highest level in over a week as the dollar tumbled on growing speculation of a US rate cut, boosting sentiment in commodity markets. AnalysSouthern Copper, one of the world's largest copper producers, reached a wage agreement on Saturday.
"The settlement at Southern Copper is weighing on prices," analyst David Thurtell at BNP Paribas told Reuters. Peru's Southern Copper, controlled by Grupo Mexico, expects output this year to total between 660,000 and 670,000 tonnes and rise next year to 700,000.
Copper for delivery in three months on the London Metal Exchange ended at $7,845 per tonne compared with $7,870 on Friday. Earlier it touched $7,969, the highest since October 18. At the New York Mercantile Exchange, copper for December delivery ended down 1.65 cents to $3.5210 a lb after dealing between $3.5155 and $3.5895, its loftiest level since October 22.
"Rising stocks this morning also appears to have deterred US players," Thurtell said, referring to prices turning lower. Stocks of copper in LME warehouses have risen to above 150,000 tonnes - enough to feed global consumption for three days - from below 100,000 tonnes in July.
More availability is reflected in the falling premium for cash material over the three-month contract, known as backwardation, which has fallen to around $30 a tonne compared with more than $150 in August.
Expectations that the US Federal Reserve will trim benchmark interest rates by a quarter percentage point to 4.5 percent later this week helped a rally in equities, including London-listed miners. Anglo American, Kazakhmys and Vedanta Resources were all up over 3 percent, while Xstrata was up nearly 1.4 percent on its A$3.1 billion offer for Australia's Jubilee Mines.
The dollar slid to record lows against a basket of currencies and its lowest level against the euro since the launch of the single currency in 1999. "The increases we've seen are essentially down to another bout of dollar weakness," said Leon Westgate, analyst at Standard Bank. "Dollar weakness should underpin prices."
Data from the International Copper Study Group showed the copper market was 318,000 tonnes in deficit from January to July, against 26,000 a year ago. Three-months lead closed at $3,640 a tonne, down $20. The premium for lead too has fallen to around $24 a tonne from more than $100 two weeks ago. Stocks at above 39,000 tonnes - two days global consumption - are up nearly 90 percent since late September. Zinc was firm at $2,905 from $2,900, tin was up at $16,850 from $16,450/16,500 and aluminium traded down at $2,525 from $2,538 on Friday.
Nickel traded down at $31,550 from $31,800 on Friday. So far, Xstrata's bid for Jubilee mines had little impact on nickel, a key ingredient for stainless steel, traders said. Jubilee mines around 12,000 tonnes of nickel a year, less than 1 percent of global output, and is planning to take annual output to 22,000 tonnes.
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