Copper sees fresh seven-week high

Copper touched a new seven-week peak on Wednesday as the market fretted about strike threats, while lead hit a new record high for the third day running as speculators bet on tight supplies. Copper for delivery in three months on the London Metal Exchange ended up at $7,825 a tonne compared with $7,725 on Tuesday. Earlier it hit $7,858, the highest since May 14.
"The strikes are the main thing supporting the market at the moment," said Michael Widmer, analyst at Calyon. The latest on the strike front included news that workers at Chile's Collahuasi, one of the world's largest copper mines, were unimpressed by a new pay offer from management and planned to strike next week unless the offer was improved.
Base metals prices also ticked up after news that Mexico's mining union planned a 24-hour nation-wide walkout on Thursday unless the labour ministry met its demands to improve safety in mines. Strike threats have increased the focus on falling copper stocks in LME warehouses.
Stocks of the metal, used in the power and construction industries, fell 1,650 tonnes to 110,375, little more than two days of global consumption and the lowest since last October. Tight supplies and a potential squeeze by one large holder with claims on up to 90 percent of copper in LME warehouses was reflected in the premium for cash metal over the three-month, which has doubled to around $123 over the past two weeks.
The large long position pushed the key daily premium for tom/next (tomorrow/next day) belated business against the previous day's cash to $20 before falling back to $5. "This means borrowers of tom to cash had to pay $20 to trade for one day very costly," an LME trader said. Lead hit a fresh high at $2,890 as speculators bet on falling exports from China. The metal, used mainly for making batteries, ended higher at $2,886 from $2,770 on Tuesday.
Shipping delays at the Canada-based Ivernia's Magellan mine in Australia and output cuts by Chinese lead smelters because of raw material shortages have fuelled gains.
"Prices of the heavy metal have surged as the market has embraced the notion that supplies from China will fall significantly below previous forecasts," Standard Bank said in a research note. "We view lead as overpriced at this level."
With prices gaining some 70 percent this year, Standard Bank has revised up price forecasts. It expects cash lead to trade at $2,175 in 2007 and $1,700 on average in 2008. China is the top lead supplier to the global market and news that Yuguang Gold and Lead with capacity to produce 100,000 tonnes a year, might shut one of its lines spooked the market.
"We will see a continuing weakness in Chinese refined lead production output for the next few months until the fourth quarter of 2007," a Macquarie report said. Aluminium gained to $2,782 from $2,746, tin added $275 to $14,100 and zinc gained $30 at $3,450.
Nickel closed at $36,300 from $36,295/36,300 on Tuesday. The metal has lost around 30 percent since a record high of $51,800 in May on expectations of falling demand from stainless steel makers.