Strikes support copper, nickel sets four-month low

Copper prices rose on Friday to near two-week highs as strike threats outweighed the risk aversion that had disrupted markets earlier this week, while nickel touched a four-month low. "Tight fundamentals are reasserting themselves, there's not too much risk-aversion selling at the moment," a trader on the LME floor said.
Copper for three months delivery on the London Metal Exchange climbed as high as $7,640 a tonne, its strongest since June 18, and traders said more money could be heading for the market in July. That and the various strike threats around the world might be enough to prevent the market going down much from current levels, LME broker Triland Metals said in a market report.
Strikes and threats to supplies at various copper mines in South America, Canada and elsewhere around the world have raised worries about copper supplies. The metal used extensively in the power and construction industries ended at $7,560 after a little profit-taking but was still $19 above Thursday's close.
"Labour unrest everywhere from Peru and Chile through to Canada, Zambia and Poland has hit the newswires during June," consultants CRU Group said in a research note.
"Whilst copper producers have collectively played down the impact...the market remains highly vulnerable to price spikes given the potential for significant disruption."
Expectations of higher base metals prices boosted mining stocks. London-listed miners such as Rio Tinto, BHP Billiton, Kazakhmys, Anglo American and Xstrata were up between 0.64 and 1.3 percent, while the FTSE index was up 0.56 percent, in line with European stocks that rose after tame United States inflation data reassured investors.
Investor confidence, battered in recent days by trouble in credit markets, appears to be stronger. That has lifted base metals, as has falling stockpiles of unusued metal.
Copper stocks in LME warehouses are at 114,700 tonnes, less than three days of global consumption and the lowest since October, while stocks monitored by the Shanghai Futures Exchange fell 5.6 percent last week to 90,167 tonnes. Low lead stocks in LME warehouses at 45,075 tonnes, little more than two days of global consumption, also boosted the metal used mainly in batteries.
Lead was at $2,658 a tonne from $2,650 on Thursday. Earlier this week the metal touched a contract high of $2,745, having gained 64 percent since the end of last year as the market factored in output cuts in China.
However, a generally bullish mood did not permeate the nickel market, where participants focused on stainless steel production cuts in China. About two-thirds of global nickel production is used for making stainless steel.
"The stainless steel production outlook is quite weak in the near term," said Max Layton, analyst at Macquarie Bank. "Stainless steel stocks have reduced in value and producers are better off selling those than producing more. It's a downward spiral."
Nickel touched $35,350 a tonne, its lowest since February 13 and a loss of around 30 percent since the record high of $51,800 seen on May 9. It ended the day at $36,200 from $36,750. Aluminium was a touch lower at $2,728 from $2,740 on Thursday, zinc was $25 softer at $3,355 and tin was at $13,850/13,900 from $13,875.