Copper steadies as mine strike threat offsets dollar, oil strength

Copper steadied on Tuesday as the prospect of a mining strike in top producer Chile offset concerns that a strong dollar and elevated oil prices will hurt demand.

Benchmark three-month copper on the London Metal Exchange was up 0.2% to $14,447 per metric ton in official open outcry activity. It lost 1.4% on Monday, hitting its lowest since September 17 on weak Chinese industrial profits data.

Despite signs of deteriorating economic growth due to the Iran war and oil above $100 a barrel, copper still has some upside risk, said Panmure Liberum analyst Tom Price.

“And that’s really because the global market has been starved of inventory because it continues to be transferred into the US,” Price said, adding that underperforming production in Chile was a secondary driver.

LME copper stocks dipped by 875 tons to 251,350 tons, although only around half are available to the market. In the US, COMEX inventories have risen for six straight days to over 700,000 metric tons for the first time as the possibility of an import tariff next year remains.

In Chile, workers at two unions at Antofagasta’s Centinela copper mine rejected a collective contract offer on Monday, paving the way for a strike. Meanwhile, one of the unions at the giant Escondida mine last week rejected BHP’s attempt to delay contract talks.

The dollar tested several-month highs on Tuesday, making greenback-denominated metals more expensive for investors using other currencies. Markets were pricing in more than a 70% chance of another Federal Reserve rate increase in October, which would be negative for base metals.

Traders are also awaiting manufacturing purchasing managers’ data in China this week for further demand signals. Restocking ahead of the country’s week-long National Day holiday from Thursday has largely been completed, analysts at Galaxy Futures said.

Aluminium fell 0.6% to $3,231 a ton, zinc gained 0.5% to $3,870, lead edged up 0.2% to $1,906, nickel shed 0.7% to $16,065, touching its lowest since September 16, and tin added 0.4% to $54,025.