London copper prices closed firm on Friday after the previous day's 2.4 percent loss as most workers at the world's biggest copper mine remained on strike. Three-month London Metal Exchange (LME) copper ended $120 higher at $7,550 a tonne ahead of a long UK holiday weekend.
The metal was underpinned by the strike at BHP Billiton's Escondida copper mine in Chile, which started nearly three weeks ago, halving production at a mine that supplies 8 percent of world copper. Copper earlier touched $7,605, before giving up some of those gains after BHP said it had restored limited production of copper cathode.
"We have restarted cathode production at the SX-EW (solvent extraction-electro winning) operation. We are at 10 percent of capacity," a BHP spokesman told Reuters.
Some union workers had returned to work on Thursday, BHP said. But a spokesman for the 2,052-member union said he had no confirmation of any union members returning to work. "The strike seems to be continuing. If it drags on for over a month its could start to cause real supply problems," a trader said.
With inventories falling, analysts looked to the next hurdle when labour contracts at Codelco mines that account for 12 percent of global copper production expire in the fourth quarter.
"Further production disruptions may lie ahead," a Deutsche Bank report said. On the demand side, the latest data released by the China Customs General Administration revealed subdued imports of refined copper in July, a Barclays Capital report said. However, Barclays did not view the weak refined copper import data as representative of weak copper demand in China. "Indeed our calculations of apparent Chinese copper demand, which take into account SRB (State Reserve Bureau) reserve sales, actually show a strong rise in China's apparent copper consumption in July up 12.7 percent year-on-year."
Three-month nickel closed at $29,250 versus $28,900. Earlier this week, nickel hit a new record high of $29,950, reflecting acute shortages created by buoyant demand from China. LME-monitored warehouse stocks fell 306 tonnes to 6,120 tonnes on Friday, of which only 1,674 tonnes were available to the market to meet global consumption of 3,600 tonnes a day.
In nickel, production delays at Inco's New Caledonia operation mean market deficits may persist until the end of the decade, a Deutsche Bank report said. "Production is already 12 months behind schedule and is currently not expected to come on line until the beginning of 2008," the report said. Any shortfalls in nickel's current production profile could prevent the nickel market returning to surplus until 2011. Three-month aluminium was down $1 at $2,484.