COMEX copper futures rebounded from new three-week lows to settle just off their session highs on Monday as bargain buyers and short-covering boosted prices while threats of a strike at Chile's Escondida still loomed over the market, sources said.
"There was some early follow-through selling from last Friday and that weeded out some of the half-hearted longs. We were a little oversold...the ring got caught a little short and guys had to cover when it started to turn around," said one COMEX floor dealer. "We tested the lows and closed on the highs, so I expect it to continue to grind higher, especially with the possibility of a strike in Chile," he added.
Benchmark September copper closed up 5.90 cents at $3.3820 a lb on the New York Mercantile Exchange's COMEX division, dealing between $3.3850 and $3.21, its weakest level since June 29.
Support was pegged at around the $3.20 a lb level, and then at $3.15, while resistance continued to be seen at $3.77. Spot July rose 6.70 cents to finish the day at its session peak at $3.4835. COMEX copper volume just before the close was estimated at a modest 7,000 lots, against Friday's official count at 10,039 lots.
Union leaders at Escondida, the world's largest copper mine, said they are not optimistic about a new contract offer from the company and are prepared for a strike vote on Friday, July 28.
A strike could begin on August 1, unless the company requests mediation from labour authorities, in which case both sides have five more days to resolve their differences. "There is still a valid story you can trade on the supply side in copper...the market is still fundamentally very tight, so the natural trade in the market is to buy the pullback right now," said one broker at a New York trading house.
Upcoming labor negotiations at Teck Cominco Ltd's Highland Valley copper mine and the Antamina copper facility in Peru should help to keep the market buoyant in the near-term, analysts said. Looking at the tight supply situation, London Metal Exchange copper warehouse stocks rose 975 tonnes to 97,300 tonnes on Monday, while COMEX inventories were flat at 7,144 short tons in Friday's data.
After the close on Friday, the latest weekly Commitments of Traders data issued by the Commodity Futures Trading Commission showed the net short position in COMEX copper futures rose 51.3 percent to 3,349 lots in the week ended July 18.
Meanwhile, China will prohibit new investment in copper smelters with annual capacity of less than 100,000 tonnes, or those that lack access to raw materials, under a policy aimed at staving off new entrants to the sector.
China's refined copper output rose 23 percent in the first half of this year, to 1.42 million tonnes. LME three-months copper closed up $125 to $7,160 a tonne against Friday's kerb close.