New York copper set a new contract peak on Thursday when it rallied to its highest level since July, gaining on news that Peru's national copper strike seemed like it would continue for a while, traders said.
"There is a bunch of underlying bullish news and sentiment out there. Copper's continuing the upturned from a month ago on more stock drawdown both in the US and LME.
And shorts are finally saying, 'It's not going down, let's start covering,'" said one New York metals dealer. He said late news that two of Southern Copper Corp's three units in Peru would continue their strike helped send copper to its 10-month high as the market headed into the close.
Most-active copper for July delivery gained 2.25 percent, or 8.20 cents, to $3.7265 a lb., hitting a 10-month peak at $3.75 a lb. The intrude low was higher at $3.6270.
A partial strike at Southern Copper, one of the world's top copper miners affected the company's Toquepala and Cajon mines, along with its Ilo smelter.
A government-mediated meeting between the company and striking unions was scheduled for the afternoon to try to reach an accord on worker demands.
Copper had already firmed overnight on another large drawdown in exchange warehouse inventories, then pushed higher following a robust US productivity report, traders said.
Productivity, along with a drop in weekly US unemployment filings, lifted US equity markets, implying stronger demand for copper, participants said. US business productivity grew by a greater-than-expected 1.7 percent in the first three months of 2007 and labour costs rose far less than forecast, a combination that may forestall a US interest-rate hike by the Federal Reserve.
Analysts were expecting business productivity, a measure of how much a worker can produce in an hour, to rise 1 percent. "Most important is productivity. It's good all around to have higher productivity, which means lower costs and lower inflation," said Robert Macintosh, chief economist at Eaton Vance Management in Boston.
As for Fed policy, he said, "They should be less willing to tighten and more willing to cut, everything else being equal." The steep decline in initial filings for US State unemployment benefits reinforced that view. Analysts had anticipated an increase in claims. Both economic reports strengthened US equity markets, adding to an outlook for continued strong copper demand.
On the supply side, declines in exchange warehouse inventories added to the supply curtailed in Peru's mining operations. London Metal Exchange warehouse copper stocks fell by 2,200 tonnes to 152,025 tonnes, their lowest level since mid-November.
With supplies stretched so tight, London traders said little cushion was left to buffer against any output disruptions. Comex copper inventories fell by 164 short tons to 32,839 short tons on Wednesday.
On Thursday's final open-outcry trading volume for Comex copper futures reached 10,773 lots. LME copper for three-month delivery also ended at a near 10-month high of $8,180 a tonne, well up from Wednesday's kerb close at $7,955 a tonne.