Shanghai copper rose 2 percent on Monday ahead of a week-long holiday, on fears of a rise in London futures when Shanghai is closed and given an imminent strike by miners in Peru. The most active July copper contract on the Shanghai Futures Exchange rose 1,370 yuan from Friday to 69,630 yuan ($9,018) a tonne at midday.
"People are buying material ahead of Labour Day. Spot premiums are up because buyers think London Metal Exchange prices will be higher," a dealer in Shanghai said. Shanghai will be closed for a week from Tuesday for the May Golden Week holidays, while Japanese markets are closed on Monday, Thursday and Friday.
London Metal Exchange copper for delivery in three months fell $15 from the previous close, to $7,735. LME copper prices dropped as low as $7,575 on Friday before recovering to end 1.2 percent higher.
Peru's largest miners' union rejected a last-minute government proposal to avert a nation-wide strike, and said an indefinite walkout would begin at midnight on Sunday. Peru is the world's third largest producer of copper and zinc.
"We are not returning (to the negotiating table), what for? We have agreed to ratify our demands and we are going on strike as of midnight," Castle told Reuters via telephone.
"There is a bit of premium building in Shanghai copper prices, just in case," said Gerard Burg, analyst at National Australia Bank. "We don't normally see a big rise in prices until there are significant disruptions to supply, and I don't think it is in anyone's interest to see prolonged strike this time."
The last nation-wide strike took place three years ago, when miners stopped work for 48 hours to protest the previous government's labour policies. The market shrugged off a move by China's central bank to raise the amount that lenders must hold in reserve by 0.5 of a percentage point to 11 percent, the seventh increase since last June.
Beijing is trying to curb expansion in China's economy, which grew by over 11 percent in the first quarter, and has singled out over-investment in energy intensive sectors such as aluminium smelting for additional measures.
"The market is pretty quiet. No one is taking much notice of the move by China's central bank so far. We have seen it all before," a dealer in Australia said. But analyst Cai Luoyi at China International Futures in Shanghai said: "I think the reserve requirement rate rise will put some stress on the metals market and will hurt China's metal consumption in the second half, although the influence now is seen limited."
He added that the attempt to curb liquidity would restrict fixed asset investment, a cornerstone for metals consumption. Cai said that investors would focus on China's booming stock markets where they have experienced strong returns. Aluminium Corp of China (Chalice) the world's third-largest producer of alumina, tripled from its offer price as it debuted in Shanghai on Monday. The benchmark Shanghai Composite Index is up over 40 percent this year, after soaring 130 percent in 2006.