LONDON: Copper rose on Tuesday, heading back towards last week's two-month high, on concern over potential supply disruptions in Chile and a weakening dollar, while trading was lighter than usual due to the week-long Chinese Lunar New Year break.
The dollar was on course for its worst start to a year since 2008 as concerns over the broader shape of policy under President Trump outweighed the expectations of higher US inflation which dominated the end of last year. A weaker dollar makes dollar-priced metals cheaper for non-US investors.
"Eventually Trump's policies could feed through to weaker metals prices, but for now the markets are seeing a weaker dollar and pinning their hopes on infrastructure investment in the US," said Warren Patterson, commodities strategist at ING.
Three-month copper on the London Metal Exchange traded up 1.9 percent in official midday rings at $5,930 a tonne, heading back towards last week's two-month high of $5,981.50.
Underpinning the metal, workers at the Escondida copper mine in Chile, the world's largest, entered the final stretch of voting on Monday on the company's wage offer, with the union saying it was confident a strike would be approved. The spotlight remains on copper supply woes, said JPMorgan in a report, but it added that signs of softer demand have mitigated these concerns somewhat.
"Major Chinese and Japanese smelters are currently well supplied," the bank said. "In addition, three Chinese copper smelters (Jinguan, Yuguang, and Minmetals) with total 2016 production of 460,000 tonnes are planning to close for maintenance between February and March for 30-45 days." The bank expects spot copper treatment and refining charges (TC/RCs) to inch up to around $90/9.0c this quarter.
Miners pay higher ore processing fees to smelters when demand is subdued. Also tempering copper's gains, Indonesia will temporarily exempt Freeport-McMoRan from some new rules while processing its application for new mining rights, potentially allowing for the resumption of copper concentrate exports.
Zinc was last bid up 2.6 percent in rings at $2,849.50, having earlier hit a two month peak of $2,867. LME data showed zinc stocks at their lowest level since June last year at 394,450 tonnes. Aluminium rose 1.1 percent to $1,822, having hit a 20-month peak last week on talk of potential capacity cuts in China.
Investors are waiting to see what, if anything, the government announces after the Lunar New Year break. Lead added 0.6 percent to $2,355, tin climbed 2 percent to $20,075, while nickel was last bid up 2.6 percent at $9,920.
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