LONDON: Copper edged lower on Tuesday as concern over the economic impact of rising coronavirus cases and a jump in metal inventories offset worries about possible strike action in Chile.
Metals and other financial markets were unsettled after Federal Reserve Chair Jerome Powell warned that the US economic recovery remains far from complete and could still slip into a downward spiral.
But losses were modest as investors eyed possible mine disruptions in top copper producer Chile.
A labour union at the Candelaria copper mine in Chile rejected a contract offer from Canada’s Lundin Mining, raising the possibility of a strike.
Mines with combined annual production of about 2.8 million tonnes have labour negotiations in the fourth quarter, UBS analyst Daniel Major said in a note. These include Escondida, the world’s largest copper mine, he added.
“The wage negotiations and potential strike action is providing underlying support for copper. But copper has really not been able to build on Friday’s gains ... so copper remains fragile,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Three-month copper on the London Metal Exchange (LME) was down 0.1% at $6,520 a tonne by 1605 GMT after volatile swings last week. The price slid 4.3% to a seven-week low on Thursday and rebounded 2.6% on Friday.
“On the downside, if it moves back below $6,450, then the market would start to worry about a deeper correction than we’ve seen already,” Hansen added.
LME aluminium fell 0.5% to $1,767 a tonne, giving up gains after on-warrant LME inventories dropped by nearly 70,000 tonnes to 1,126,600 tonnes, the lowest level since April 9.
The discount on LME cash copper against the three-month contract stretched to $14.25 a tonne, its biggest since June. 22, indicating healthy nearby supplies. LME copper inventories have doubled over the past two weeks.
Zinc gained 1.1% to $2,352 a tonne, lead climbed 1.3% to $1,780, nickel slipped 1.1% to $14,490 and tin was up 0.4% at $18,150.—Reuters
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