Base metal prices rose on Thursday, recovering from this week's cross-asset sell-off as risk aversion eased in a market now underpinned by industrial action, traders said.
Copper for delivery in three months on the London Metal Exchange ended the day at $7,541 a tonne, up $161 from Wednesday, when it rallied by $120.
"On the one hand strikes facing the market...steady outflows in LME stocks that reflect geographically widespread demand and large cancelled warrants are providing support to prices," Barclays Capital said, referring to signs that more metal is about to leave storage.
On the other hand were concerns about slacker demand in China, it said, which prompted the bank to cut its third quarter price forecasts for some of the LME metals.
In the longer term, demand growth would reassert itself and, combined with tight supply, keep prices high, it said. Workers at Chile's Collahuasi copper mine voted late on Wednesday to go on strike after rejecting a wage deal from management.
The mine is one of the world's largest producers of copper, with output of some 440,000 tonnes per year. "Evidence in recent days suggest the market's not expecting long strikes...Generally speaking, strikes in Chile do not last that long," said economist Stephen Briggs at Societe Generale Corporate and Investment Banking.
Mining shares like Xstrata, BHP Billiton and Rio Tinto gained between 1 and 3 percent, tracking a rise in broader European shares and on the back of firmer metal prices.
The market also awaited the US Federal Reserve's rate decision and statement, due at 1815 GMT. "Strikes will likely keep the bears at bay, but only prolonged action and major disruption will lift the copper price," Standard Bank said in a research note.
At Chile's Codelco, the world's biggest copper miner, operations were returning to normal on Wednesday across its five divisions following protests by subcontracted workers this week, the company said. A stoppage at Xstrata's Canadian Copper Refinery in Montreal dragged into its third week and no talks were likely until after a national holiday on July 2.
Workers at Southern Copper's Peruvian operations were heading back to work after suspending their strike over higher wages for six days to negotiate with the company, a union leader at the Cuajone mine said.
Briggs said low copper inventories were also supporting prices. LME stocks of copper have fallen around 100,000 tonnes since early February and currently stand at 116,375 tonnes - less than three days of global consumption.
Lead was up $55 to $2,650. The metal hit an all-time high of $2,745 earlier in the week.
Nickel, which has lost some $15,000 since early May, when it hit an all-time high of $51,800 a tonne, fell $750 to $36,750 versus a last quote of $37,500/37,600 while zinc was $35 firmer at $3,380.
"We expect nickel to take direction from short-term technical factors while zinc is still searching for direction and is likely to continue to track more prominent metals like copper," Standard Bank said.
Aluminium firmed $35 to $2,740 and tin was at $13,890/13,900 against $13,875 on Wednesday. British market regulator the Financial Services Authority said it was looking to publish reports on speculative positions in commodity futures, as its United States equivalent already does.