Comex copper ends strong

06 Aug, 2006

Copper futures in New York held onto three-week gains into the close on Friday as players bought at the dips, after a day rout, in anticipation of a possible strike at Chile's Escondida copper mine, the world's largest, traders said.
"I've been surprised by the volatility both down and up over the last two days. It seemed fairly obvious that the negotiations at the Escondida mine would be coming down to the last minute, this weekend," said Dan Vaught, futures analyst with A.G. Edwards in St. Louis.
Copper for September delivery finished with gains of 14.30 cents at $3.6325 per lb on the New York Mercantile Exchange's Comex division.
It hit a high at $3.6850 a level last seen on July 17. Spot August advanced 13.30 cents to end at $3.6625 a lb, after charging up to a high at $3.72.
Comex estimated final volume at 13,000 lots a more than the 9,547-lot count on Thursday. After the close on Friday, management at the Escondido copper mine offered its more than 2,000 union workers a new contract in a bid to prevent a strike on Monday.
Union representatives said they would analyse the new proposal. They told Reuters that while the latest offer was an improvement, there were still issues to work out.
Friday is the last day for workers and Escondido, a massive open-pit mine that is majority owned by global miner BHP Billion, to reach an agreement.
"We still don't know how this is going to play out. Although the way the market acted today and some of the late statements suggest that we will see them standing outside the gates on Monday," said Vaught.
The two sides remained far apart in their negotiations for a new wage deal. The union wants a pact that reflects current copper prices, which are over five times the price when they last negotiated in 2003, while the mine is trying to protect itself from the next cyclical downturn in the metal price.
"The new offer didn't look like a great improvement to me. But that's sometimes how these things seem to get resolved. Take it down to the wire, lock them in a room and get to down to brass tacks," Vaughn added.
In addition to Escondido, copper advanced after July US employment showed softer-than-expected jobs growth and suggested the Federal Reserve may not raise interest rates at its August meeting, traders said.
The US dollar slid and US equity markets jumped at the prospects that the Fed.'s campaign to tighten credit may be on hold when the policy-setting committee meets on Tuesday.
"We rallied in the face of an increase in both LME and Shanghai stocks. That would ordinarily be a negative. But in the face of this employment data and the interest rate implications, the weak dollar, the firmer equity market, and of course Escondido, all contributed to firmer trade," said James Quinn, commodity commentator at AG Edwards.
US employers added 113,000 new jobs in July, a slower pace than the forecast 142,000 payrolls. Also, the unemployment rate jumped unexpectedly to 4.8 percent.
London Metal Exchange stocks increased by 1,200 tonnes to 102,825 tonnes on Friday. Comex inventories remained unchanged at 6,756 short tons on Thursday.
LME three-months copper shot up to a session high at $7,999 a tonne, and closed at $7,860 a tonne, a huge jump above on Thursday's close at $7,490 a tonne.

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