Strikes support metals

Strikes supported industrial metals prices on Wednesday, reversing an early fall on fears about a general economic slowdown. Early weakness in prices hit London-listed mining firms, though copper and other metals ended the day with gains.
Xstrata, BHP Billiton and Rio Tinto shed between 1.7 and 2.8 percent to fall more steeply than the FTSE index, which was down 0.5 percent. Benchmark contract copper for delivery in three months on the London Metal Exchange (LME) closed up $20 at $7,380 per tonne after trading down to $7,245, some $115 below Tuesday's close.
"Underlying support to copper prices amid moderating Chinese demand continues to stem from the multitude of strikes facing the copper market," Barclays Capital said in a note.
A series of strikes and threats of new ones is capping losses at a time when LME stocks are critically low, traders said. "There are strikes going on...the backwardation in copper prices reflects the market's concern," one LME dealer said. The backwardation - the premium for cash metal over three-month price - was at $80/90, rising from $60 on June 21. Workers at the large Collahuasi copper mine in northern Chile expect to vote for a strike on Wednesday while elsewhere in the country Codelco said output was unaffected despite protests by subcontract workers.
In Peru, workers at Southern Copper Corp continued their strike which started on Saturday, though the company said the strike was partial. A strike at Xstrata's 370,000 tonne-per-year CCR refinery in Montreal has cut production to around one-third of capacity since June 11 and no talks were expected before the Canada Day holiday on July 2.
"Should the disruption persist, and potentially be added to by the likes of Collahuasi, then upward pressure will increase," Standard Bank said in a research note. Having fallen almost 100,000 tonnes since early February, LME stocks currently stand at 117,450 tonnes - less than three days of global consumption.
Metals, energy and other assets seen as risky have suffered this week as investors sold in favour of safer securities. Many believe the fundamental picture of tight supply and strong demand has not been altered.
Fund manager John Payne said he believed the bull market in commodities still had at least another 10 years to run. Payne, who runs the Resolution Hexam Global Resources Absolute Return fund, said industrialisation in China and India would continue to support prices.
Investors have been increasingly unnerved over the past weeks by troubles at two Bear Stearns-managed hedge funds with exposure to subprime - or high-risk - US mortgage securities. A sharp sell-off or failure of such mortgages could raise borrowing costs for companies, threaten banks with bad debts and bring losses to a wide variety of investors.
"Liquidity issues might prompt some short-term profit taking, eg, subprime lending worries," analyst John Meyer at Numis said. Stainless steel raw material nickel was up $5 at a closing quote of $37,500/37,600. With stocks at almost one-year highs, prices have lost around $15,000 since early May, when they hit an all-time high of $51,800. Lead was at $2,595 a tonne, up $15 from Tuesday's close.
The metal tumbled almost 5 percent on Tuesday after hitting a fresh all-time high of $2,745. Aluminium was at $2,705, up $5. "Price movements remain tied to the performance of the rest of the complex, while consumer interest around $2,650/t is preventing prices from falling too far," Barclays Capital said in a note. Zinc was down $55 at $3,345 while tin was down $50 at $13,925.