US copper futures charged to a new three-month high above $3.56 a lb in early business on Friday as market bulls continued to feast on a rally fuelled by expectations of near-term supply tightness, brokers said.
Copper for March delivery was trading up 9.75 cents or 2.8 percent at $3.5515 by 11:15 am EST (1615 GMT) on the New York Mercantile Exchange's Comex division, slightly down from an early session peak of $3.5640 which marked its highest since October 29.
Futures volume was estimated at a healthy 14,009 lots by 10:00 am. Daily drawdowns in London Metal Exchange warehouse stocks since the beginning of the year, coupled with weather-related infrastructure problems in China, natural gas shortages in Chile, and reports of lower output at Chile's Codelco for 2007, have underpinned a rally that has boosted prices of the metal by more than 8 percent for the week.
"I think the London Metal Exchange stocks are the main driver of this rally down almost 20 percent in one month? Somebody is out there buying this stuff, and it looks like the Chinese," said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.
In China, sever winter weather has forced some major copper smelters to shut down operations, raising market speculation that the country will likely need to reach out to the market for additional supply.
"The situation in China has compromised their infrastructure and is likely to lead to increased and unexpected demand from the country, and that is clearly working against the clear slowdown in the US," said one market analyst.
Meanwhile, a report in Chile's El Mercurio newspaper on Thursday said Codelco would report a near 100,000-tonne drop in copper production in 2007. Chile also announced measures on Thursday meant to help cut down on electricity consumption as energy grids have been hit hard in recent months by reduced generating capacity due to shortages in natural gas supplies from Argentina and lower reservoir levels for hydro generation after less rainfall.
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