Shanghai copper rose by nearly 2 percent on Tuesday after an impending strike at a giant Mexican copper mine lifted London futures and shrugged off another move by the Chinese central bank to cool the booming economy. The most active October contract on the Shanghai Futures Exchange was up 1.7 percent, or 1,170 yuan, at 68,890 yuan ($9,105) a tonne.
China's central bank said on Monday that it would raise the amount that lenders must hold in reserve for the ninth time since June 2006. The 0.5 percentage point increase in the reserve requirement ratio would take effect on August 15. That takes the ratio for big banks to 12.0 percent.
Analysts warned that China's attempt to cool its racing economy could reduce metal consumption in the long term. But in the short-term, the Chinese copper market is slowly firming after a glut of imports in the first half.
"I do not think the reserve requirement ratio hike will have any immediate direct impact on the metals market," said analyst CIA Luoyi at China International Futures. Copper for delivery in three months on the London Metal Exchange was up $45 to $7,870 a tonne, driven by industrial action in Mexico. Union workers at Group Mexico's giant Cananea copper mine in northern Mexico walked out on Monday after London markets closed.
But the mine continued operating, as another group of workers remains opposed to the strike. In another development, Chile's Codelco, the world's largest copper miner said on Monday it had reached a provisional agreement with its subcontracted workers aimed at ending their five-week long strike. Concerns about tight supplies and expectations of strong demand from China and other emerging markets intensified as stocks of copper in LME warehouses fell 1,000 tonnes to 101,800 tonnes, little more than two days' global consumption.
Tin was unchanged at $16,050 a tonne, after hitting a new record high of $16,100 a tonne on Monday. Tin has gained more than 35 percent since the start of this year on concerns about output in Indonesia, the world's second-largest producer after China.
Zinc, which has tumbled nearly one-fourth from a record high in November, was flat at $3,470 a tonne. "The weak rally fell away from resistance at $3,750. The first support level is the weak consolidation band between $3,380-$3,430. Failure of this level will use the downtrend line as a new support level," Daryl Guppy of Guppytraders.com said in a note.