Copper hits 10-year peak on supply concerns and inventories

LONDON: Copper prices soared to 10-year highs on Monday as Chile supply concerns, sliding inventories, a weaker dollar and expected strong demand from top consumer China triggered fresh buying.

Benchmark copper on the London Metal Exchange (LME) traded 1.9% up at $9,730 a tonne in official rings. Prices of the industrial metal earlier hit $9,750 a tonne, its highest since August 2011.

"The Chile news helped, but there was already a lot of momentum based on a few things, including stocks and the dollar," one metals trader said. "Chinese demand moving into the seasonally strong period is another factor."

CHILE: Mining unions in Chile have threatened to protest if the government does not drop a bid to block Chileans from drawing down more of their pensions savings early. Port workers, meanwhile, have called for a general strike.

INVENTORIES: Stocks of copper in LME-registered warehouses at 155,100 tonnes have fallen about 10% over the past couple of weeks.

Cancelled warrants, metal earmarked for delivery, at 53% indicate more copper will soon be leaving LME warehouses.

This and one large holding of copper warrants and cash contracts have fuelled worry about supplies on the LME market and created a premium for cash copper over the three-month contract.

DEMAND: China accounts for roughly half of global copper consumption estimated at about 24 million tonnes this year. Its demand typically rises in the second quarter ahead of a pick up in construction activity over the summer months.

Surveys of purchasing managers in China's manufacturing sector later this week and early next week will be watched closely for clues on demand prospects.

DOLLAR: A weaker US currency makes dollar-denominated metals cheaper for holders of other currencies, which could boost demand. This is a relationship used by funds to generate buy and sell signals from numerical models.

OTHER METALS: Aluminium was up 1.2% at $2,393.5 a tonne, zinc rose 0.9% to $2,877.5, lead gained 0.9% to $2,076, tin was up 0.8% at $27,002 and nickel added 0.6% to $16,495.