LME Metals Up In Asia; Copper Nears $8,000

SINGAPORE--London Metal Exchange copper rose Monday on concerns of supply disruptions at mines in Indonesia and Argentina and strong gains on the Shanghai Futures Exchange, giving a lift to other base metals and setting itself up for fresh highs, traders said.

Three-month copper was trading at $7,928 a metric ton as of 0617 GMT, up $228 from the London Friday afternoon kerb. Aluminum and zinc floated higher on copper's gains, with aluminum $28 higher at $2,840/ton and zinc up $52. Nickel, tin and lead were untraded in Asia.

Traders were hard-placed to explain the bullish tone in copper, but speculated that a possible strike at PT Freeport Indonesia's massive Grasberg mine and flooding near Xstrata's Alumbrera mine in Argentina were sparking speculative buying and short-covering.

"What's really driving it is the concern on the supply side," said a Shanghai-based trader at one of China's largest copper traders.

Workers at the Grasberg mine plan to hold a "peaceful demonstration" over wages and benefits this week, PT Freeport Indonesia spokesperson Mindo Pangaribuan said Friday.

The Grasberg mine is 90.64%-owned by U.S.-based Freeport McMoRan Copper & Gold Inc (FCX), with the remainder held by the government. Its daily output is some 1,800 metric tons of copper and 9,000 troy ounces of gold a day.

On Friday, Xstrata PLC (XTA.LN) announced it would delay two copper shipments until May at its Alumbrera copper mine, due to flooding in the region. However, production wasn't affected, a company spokeswoman said.

Standard Bank, in a daily note, said while the possible supply disruptions at the two mines was supportive to copper, it was skeptical they would drive copper higher unless new developments occurred.

"We do not read too much into these news stories at the moment but will keep a close watch," Standard Bank said.

Several traders also cast doubts on the impact these two events would have on actual copper production.

"Even if there is such a strike at Grasberg, the actual amount lost wouldn't be big, a few thousand tons," said a Tokyo-based trader with a major Japanese commodity brokerage.

Strong gains on the Shanghai Futures Exchange Monday surprised many traders, who thought there may be some insider information that was prompting heavy buying.

The Tokyo-based trader said whatever is driving copper at the moment, the upward momentum has increased and copper should test $8,000 in the short term.

"If it breaches the highest price of last week ($7,970), it could prompt some heavy stop loss buying and shoot above $8,000," said the Tokyo-based trader.

However, he said copper will struggle to stay above $8,000 because of an expected slowdown in Chinese copper imports in the second quarter.

As of 0617 GMT, tin was last quoted unchanged on the London PM kerb at $14,350/ton; nickel was quoted at $46,500, up $100; and lead was quoted unchanged at $1,995/ton.