LONDON: Copper prices rose on Tuesday after a rapid build-up of inventories that has weighed on the market since late June halted and workers voted to strike at a mine in Chile, raising supply concerns.
Stainless steel ingredient nickel also gained after Chinese steel prices reached 3-1/2 year highs, while zinc, used to galvanise steel, rose to its highest level since March.
“Copper demand is still buoyant. The market over-reacted to increases in inventory,” said ABN AMRO analyst Casper Burgering, adding car sales, construction and manufacturing output in China remained solid.
However, Capital Economics analyst Caroline Bain said growth in China and the United States in the longer term was likely to slow while interest rate rises would strengthen the US dollar, making metals more expensive for holders of other currencies.
“Our forecasts suggest that most prices will fall from here,” she told the Reuters global base metals forum.
London Metal Exchange benchmark copper closed up 0.9 percent at $5,875 a tonne after earlier rising to $5,886.
Prices had slipped nearly 3 percent since late June as stocks in LME-registered warehouses rose by a third, signalling plentiful supply. Stocks fell 225 tonnes on Tuesday to 319,750 tonnes.
Workers at Chile’s Zaldivar mine voted to strike after talks with the firm failed. The nearby Centinela mine is also in negotiations over strike action. Together the two mines produced 340,000 tonnes of copper in 2016.
Indonesia says it will invite the head of mining giant Freeport McMoRan Inc to Jakarta this month to try to settle a long-running dispute over a new deal to operate the world’s second-largest copper mine.
Vehicle sales rebounded in June, shaking off weakness in the previous two months.
Higher steel prices helped push benchmark LME nickel up 1.3 percent to close at $9,130 a tonne.
Zinc finished 1.4 percent higher at $2,820.50 after touching $2,826, the highest level since March 31. The metal has risen more than 16 percent since early June as dwindling stocks led to supply fears.
The net long position in zinc was 26 percent of open interest as of Thursday, the largest speculative long of any base metal and close to the highest since November, brokers Marex Spectron said in a note.
Federal Reserve Chair Janet Yellen will address congress on Wednesday and Thursday, giving clues about the pace of US monetary tightening.
LME aluminium closed up 0.2 percent at $1,900 a tonne, tin ended 0.5 percent lower at $19,775 and lead finished down 0.7 percent at $2,305.—Reuters
