Comex copper prices finished sharply higher on Thursday as speculative buyers covered short positions on concerns of possible supply interruptions if miners strike in Chile and negotiations go awry at Asarco operations in the US, traders said.
"It's pretty simple: fears being caused by labour issues both at Collahuasi and Asarco I'm not saying people actually think threes going to be a strike, because realistically that's very unlikely," said one copper trader.
He added, however, that strikes by union workers in Chile usually do not last long even if miners do walk off the job. "But the news story came out today. And the truth is, there are no stocks around.
The truth is threes no copper around. Threes a lot of fundamental tightness and its scary to be short, so you're seeing short covering," the dealer said. Traders said on Thursday's short covering triggered some new technical buying, as well, as funds system buy orders were hit in the rally.
Active July copper ended $2.85 higher at $1.2235 per lb. The trading range ran from $1.1890 to a high at $1.2300. September futures rallied 2.75 cents to close at $1.2240 a lb. and spot June rose 2.75 cents to $1.2245.
Other contracts finished 1.50 to 2.75 higher. A big surge in new home sales added momentum to coppers rally. US single-family home sales jumped 14.8 percent in May to a record 1.369 million annual rate, well up from a 1.192 million in April and the fastest sales pace since April 1993.
Speculators drove prices up at the open on news Chilean copper miners may strike next week. Workers at the Collahuasi copper mine in Chile plan to reject the company's wage offer in a vote next on Tuesday, paving the way for a strike to begin on July 2, a union leader said on Thursday.
The mine controlled by Falconbridge Ltd and Anglo-American Plc, produced 395,000 tonnes of copper last year and is scheduled to complete an expansion this month that would bring output to 460,000 tonnes a year.
While speculation about the progress of labour talks at Asarco, the US unit of Mexican copper giant Group Mexico, also put a lift under copper prices, a company source told Reuters on Thursday that labour talks with about 1,000 unionised workers were "progressing normally."