US copper futures closed at a new near-two month peak on Tuesday, with tight inventories in London and a potential strike at one of Chile's largest copper mines keeping this week's momentum buying alive, brokers said.
They noted push to the downside failed to attract further downside pressure, prompting a bout of short-covering heading into the close and ahead of the one-day holiday break in the US
"It looked like guys didn't want to be short going into the holiday," said one dealer down on the floor of the exchange. The New York Mercantile Exchange's energy and commodity markets will be closed on Wednesday, July 4, for the US Independence Day holiday.
Trading will resume on Thursday. Copper for September delivery settled up 1.80 cents at $3.5450 a lb. at the New York Mercantile Exchange's Comex division, its highest closing level since May 11, after dealing a session range between $3.4945 and $3.56.
Futures volumes by the close were estimated at 10,643 lots, in line with the 12,464 lots recorded on Monday. As of July 2, open interest in Comex copper futures climbed 1,201 lots to 80,303 contracts.
Floor dealers noted the recent price rally, combined with an increase in the market's open interest signalled the funds were possibly setting up to go long again amid ongoing uncertainty involving a possible strike in Chile.
Managers at Chile's Collahuasi, one of the world's largest copper mines, have made no new offer to workers who are threatening to strike over pay and conditions, the union at the mine said on Tuesday.
The two sides have until July 9 to reach a deal to avoid a strike. Workers rejected a final company offer last week and the union and managers are currently in a period of government-brokered mediation. Collahuasi accounts for around 8 percent of Chile's total copper production, with output of some 440,000 tonnes per year of copper in cathodes and in concentrates.
"As long as these labour issues continue to play out, copper should be well supported above $3.30," one dealer at a New York trading house said. In currencies, the dollar rebounded on Tuesday but remained near a record low against the euro, which was seen as a big factor in copper's ability to possibly challenge its May highs.
The euro was down 0.1 percent at $1.3617 in afternoon trading in New York, still in sight of a record high just above $1.3680 hit in April. A weaker dollar typically makes dollar-denominated assets, like copper, more attractive to non-US investors.
In economic news, new orders at US factories fell a smaller-than-forecast 0.5 percent in May, logging the first decline in four months, the Commerce Department said on Tuesday.
Analysts polled by Reuters were expecting orders to slide 1.2 percent. April orders were revised higher to show a 0.5 percent gain from the 0.3 percent rise first reported. On the supply side, London Metal Exchange copper inventories fell 575 tonnes to 112,025 tonnes on Tuesday, there lowest level since last October, and less than three days worth of global consumption. Comex stocks were unchanged at 22,123 short tons on Monday.
Looking ahead, copper prices will fall from current levels but hold high in historical terms for the rest of 2007, London-listed copper miner Antofagasta said on Tuesday.
The refined copper market will move into a moderate surplus of around 200,000 tonnes in the second half of the year, with a consensus price forecast of 305 cents per lb. ($6,724 per tonne) for the rest of 2007, Chief Financial Controller Jorge Marian said at a conference hosted by NUM's Securities. LME copper for delivery in three months ended at $7,725 a tonne, up $15 from Monday's settlement. The day, it touched $7,805 it's highest since May 14.