LONDON: Copper bounced back above $6,000 a tonne on Monday as a dispute escalated over the world's second-biggest copper operation in Indonesia while zinc was boosted by a drop in inventories.
Supply issues dominated the base metals market, with nickel also gaining ground to reach a two-month high as the market tracked the latest plans by the Philippines to close mines on environmental grounds.
In copper, US mining giant Freeport-McMoRan Inc warned on Monday that it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations at its huge Grasberg mine.
"From a fundamental perspective, it really is supply that's supporting prices, because we're not very clear on demand at the moment given the delays to Chinese data," said Caroline Bain, chief commodities economist at Capital Economics.
Three-month copper on the London Metal Exchange gained 0.8 percent to $6,005.50 a tonne in official open outcry trading, recovering from losses on Friday.
Further tightening supply is a strike at Chile's Escondida copper mine, the world's biggest, which has extended into a second week. Both Grasberg and Escondida declared force majeure last week.
"We expect the copper market to move into deficit in 2017 for the first time in six years," Citi said in a report, adding that copper would hit peaks close to $7,000 before year end.
Copper prices hit $6,204 a week ago after Escondida, operated by BHP Billiton, declared force majeure, though industry sources said that smelters and fabricators were still amply supplied with metal.
Escondida representatives plan to attend talks with striking workers on Monday as long as the union does not interfere with a shift change for non-union employees.
LME zinc failed to trade in official activity and was bid up 1.5 percent to $2,852 after LME data showed on-warrant inventories
-- those not earmarked for shipment from warehouses and therefore available to investors -- slid 11 percent to 258,050 tonnes, the lowest since January 2009.
Zinc has gained 10 percent this year on concerns that the closure and suspensions of big mines will create shortages.
"Turnover has really picked up since the (inventory) announcement ... over four times the 20-day average," Alastair Munro at Marex Spectron said in a note.
Nickel extended recent gains, bid up 0.4 percent to $11,090, the highest since Dec. 19.
The Philippines' environment minister said on Monday that she stands by her decision to shut more than half the country's operating mines and bar mining in watershed zones ahead of an inter-agency meeting later in the day to review the move.
Aluminium traded 0.4 percent higher at $1,887 in official rings, lead was bid up 1.3 percent firmer to $2,282 and tin was bid down 0.1 percent to $19,700.
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