Copper climbs as world's top two mines prepare to cut output

LONDON: Copper prices rose on Wednesday after the world's top two mines said strikes and permit delays would force them to cut output, squeezing global supply.

BHP Billiton said it would halt production at Escondida in Chile, the world's biggest copper mine, during a strike set to begin on Thursday.

The company said it could not guarantee the safety of the 80 workers the government had authorized to remain at the mine to perform "critical duties", such as equipment upkeep and adherence to environmental protocols.

Freeport-McMoRan Inc meanwhile warned it would scale back activities at its Grasberg copper mine in Indonesia due to labour unrest.

The company has also said it would cut production if it did not receive a new export permit by mid-February. Three-month copper on the London Metal Exchange traded up 1.5 percent at $5,879 a tonne in official rings, erasing a decline of 0.9 percent in the previous session.

"Our view is that the copper market will continue to tighten over the course of this year and supply disruptions are part of that view," said Daniel Morgan at UBS in Sydney. "We are looking for $3 a pound ($6,614 a tonne) for this year."

Escondida produced 1.15 million tonnes of copper in 2015, about 6 percent of the world's total. Analysts say the effect of the labour dispute is likely to be limited as recent strikes in Chile have lasted for days rather than weeks.

But a 25-day strike "would equate to 85,000 tonnes of lost output", according to Standard Chartered. That would exceed the expected global surplus of 80,000 tonnes this year according to a poll of analysts by Reuters.

In other metals, nickel traded up 1.4 percent at $10,490 a tonne after earlier touching $10,545, its highest since Jan. 11.

Nickel prices have risen more than 12 percent since Jan. 27 as the Philippine government ordered the closure of 23 mines following an environmental audit.

But the final effect of the audit is unclear. Miners demanded to see the findings after it emerged that the auditors had recommended suspensions and fines rather than closures to the government.

"Frankly, we don't really know yet (what the impact will be)," said Citi analyst David Wilson. Tin traded down 0.9 percent at $18,755 in official rings.

The metal used for solder, batteries and plating has fallen around 11 percent since Jan. 19 as expectations that China could abolish export taxes and higher inventories in LME-approved warehouses have eased concern about supply.

Aluminium traded 0.3 percent higher at $1,840 a tonne and zinc was 1 percent higher at $2,823.

Lead did not trade but was bid 1.2 percent higher at $2,373 a tonne.