Copper prices rose on Monday as the market focused on a strike in Chile, but analysts said a higher dollar would cap gains ahead of a decision on US interest rates. The industrial metal, widely used in the power and construction industries, was trading around $8,620 a tonne on the London Metal Exchange, up from $8,575 at the close on Friday when it fell to a three-week low of $8,370.
A strike at Chile's Codelco enters its 13th day on Monday. Codelco's Andina and Salvador divisions remained shut, but the Teniente underground mine reopened on Saturday. Analysts estimate lost output so far at 15,000 tonnes small change in a market which is thought to have consumed about 18 million tonnes last year. "The strikes are why copper is still trading around $8,500/8,600 a tonne as soon as we hear its over, prices will probably dip," said Eugen Weinberg, commodities analyst at Commerzbank.
He added that the dollar's recovery in recent days would subdue sentiment in base metals markets. The dollar rose against the euro, moving further away from the record high beyond $1.60 touched last week.
Traders said a major focus in base metals markets would be the US Federal Reserve's interest rate decision on Wednesday and a batch of data releases, which could yield clues to the health of the US economy.
VULNERABLE: Aluminium was trading around $3,000 a tonne, up from $2,995 on Friday. Traders expected prices of the metal used in the power, packaging and transport industries to be supported by rising energy prices in the longer term. Electricity accounts for one-third of the cost of producing aluminium. "Aluminium looks vulnerable in the next month or two," UBS said in a note.
"Aluminium inventories are ample and we see no production problems until the heights of the Chinese summer and the depths of the South African winter." That's when power shortages could once again cause disruptions and possible shortages, given that many analysts now expect the aluminium market to move to balance from a small surplus earlier this year.
Tin was around $23,900 a tonne from $23,850 a tonne. The metal hit a record high of $24,600 last week on worries about supplies from top producers China and Indonesia. Analysts said talk that prices were too high for some consumers would weigh on tin. Nickel was trading around $29,325 a tonne from $29,500 a tonne on Friday.
"Nickel prices will be supported by the Vale's announcement on costs," Weinberg said. Brazilian mining company Vale said on Friday the total investment estimate in the Onca Puma nickel project has had to be raised by about 60 percent to $2.3 billion.
Vale said in a conference call that a third of nearly $900 million in the capex increase for the Amazon project stemmed from the currency effect and the rest from rising costs of equipment and electromechanical assembly. "But in the longer term prices will come under pressure because of higher mining supplies," Weinberg said. Zinc was at $2,308 from $2,320 and lead at $2,770 from $2,770.
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