Copper dips as supply fears ease but heads for second quarterly gain

Copper fell more than 1 percent on Friday as the end of a strike at Peru's biggest copper mine dampened fears of reduced supply that had driven the metal higher this quarter, though upbeat economic data from China lent support. Workers at Freeport-McMoRan Inc's Cerro Verde facility will resume work on Friday after voting to end a near three-week strike that had halved output, the union said late on Thursday.
The re-start of the mine coincides with the Escondida mine in Chile resuming operations, ING said in a note, while there were signs that restrictions on supply from Freeport-McMoRan's Grasberg facility in Indonesia were also set to ease. "Supply issues are evaporating," Commerzbank analyst Daniel Briesemann said. "Overnight the latest news out of Peru is that the strike at the Cerro Verde mine has come to the end. Two days ago we had news that there might be a solution at Grasberg, and before that, Escondida resumed production. So I think the major (supply) issues are almost done."
London Metal Exchange copper closed down 2 percent at $5,837.50 a tonne, though prices still rose 5.6 percent in the first quarter, following a near 14 percent rise in the previous three months. Activity in China's manufacturing sector unexpectedly grew at its fastest pace in nearly five years in March, adding to evidence that the world's second-largest economy has gained momentum early this year, an official report showed on Friday.
Freeport-McMoRan Inc's Indonesian unit is close to reaching a deal that would allow the world's biggest publicly listed copper producer to temporarily resume concentrate exports, Indonesia's mining minister said on Thursday. Chile's state copper company Codelco produced 1.83 million tonnes of copper in 2016, of which 1.71 million tonnes came from its wholly-owned mines, down 1.4 percent from a year ago, the company said.
LME copper may fall to the next support at $5,774 after breaking the $5,855 a tonne level, Reuters technical analyst Wang Tao said, as its bounce from the March 9 low of $5,652 has completed. LME aluminium closed down 0.5 percent at $1,962.50 a tonne, but still posted its biggest quarterly gain in 6-1/2 years, up nearly 16 percent. The metal hit its highest since December 2014 on Thursday ahead of the Chinese manufacturing data.
Copper and zinc are the two standouts among a brightening outlook for base metals, with supply constraints and China-driven demand set to lift prices in coming months, US commodity hedge fund Blenheim Capital Management said. Copper stocks held in LME warehouses, which have been declining for almost two straight weeks, fell another 6,375 tonnes on Thursday to 291,175 tonnes, exchange data showed. However, they remain well above their March 2 low of 196,425 tonnes.
The dollar surrendered early gains to trade little changed on Friday as a Federal Reserve official's seemingly dovish remarks and uninspiring data on the US economy doused the sanguine mood from earlier this week. LME nickel ended the day down 1 percent at $10,030, while tin closed 0.1 percent higher at $20,175 a tonne. Zinc finished the day down 3.1 percent at $2,770 and lead ended 0.5 percent lower at $2,340.