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US copper futures end slightly higher on Peru strike
Reuters
Oct 2, 2007
NEW YORK, Oct 2 (Reuters) - New York copper futures finished slightly up after rising to a contract-high earlier on Tuesday, as weak U.S. housing data and tumbling precious metals prices more than offset supply concern as strikes in Peru went under way.
"Technically, it just looks overbought. You are seeing weak data coming out from the U.S. earlier this morning. With the precious metals coming off as hard as they have, there is a lot of technical selling and technical pressure here," said Zach Oxman, senior trader of Wisdom Financial in Newport Beach, California.
Copper for December delivery (HGZ7: Quote, Profile, Research) settled up 1.95 cent at $3.7110 a lb, a level last seen in mid-May on the New York Mercantile Exchange's COMEX division. It hit a low of $3.6560.
In mid-morning, copper futures hit a session-high of $3.7670 per lb, boosted by supply worries as workers in a Peruvian copper mine started a work stoppage.
On Tuesday, Peruvian workers at Southern Copper (SPC.LM: Quote, Profile, Research)(PCU.N: Quote, Profile, Research) started an indefinite strike for higher wages at the Toquepala and Cuajone mines, which produce 370,000 tonnes of copper annually, and the Ilo smelter, with output of 350,000 tonnes a year. [ID:nN02375817]
Frank McGhee, head metals trader with Integrated Brokerage Services LLC in Chicago, said that the Southern Copper news lifted futures to a new high.
"The highs were a technical point. It hit a triple-top and then you had some profit-taking up there. At the same time, there was another wave of selling in precious metals that brought copper back off the highs. But copper's holding up fairly well on the strike strength," said McGhee.
Southern Copper is controlled by Grupo Mexico (GMEXICOB.MX: Quote, Profile, Research), whose huge Cananea copper pit in Mexico has also been hit by a strike. A court ruling is due later in the week on the legality of the two-month-old work stoppage. [ID:nN01304077]
Unions in Peru, the world's third-largest producer of copper and zinc and a major supplier of precious metals, want a bigger share of lofty metals prices.
Last Friday, Peru's biggest federation of mine workers unions said it would call a nationwide mine strike on Nov. 5.
The Peruvian strike news lifted copper futures out of negative territory on Tuesday, where it began the floor session in response to a resurgent dollar against the euro.
The dollar rose from record lows as investors trimmed bets of further declines in the U.S. currency ahead of key economic data later this week.
The greenback rebounded on Tuesday, partly due to concern that policy-makers may be tiring of such a weak dollar.
A source close to the preparations for a Eurogroup meeting told Reuters that Europe will push for a stronger statement against exchange rate volatility from the Group of Seven rich nations when they meet later this month. [ID:nL02287919].
Dollar-denominated copper tends to decline in overseas markets when the dollar rises because of an unfavorable exchange rate parity.
A report earlier on Tuesday showed an index of pending U.S. home sales in August fell to its lowest since 2001, when the history of the data began. However, the dollar strengthened modestly despite the weak housing data, as dealers cashed in bets against the greenback at attractive levels.
Other copper demand fundamentals continue to show signs of strength, including robust U.S. manufacturing figures released on Monday and ongoing signs of robust growth in China.
Some traders pointed out that the copper rally ensued without China's participation. Shanghai copper futures are closed all week for National Day holidays.
Final estimated futures volume totaled 16,822 lots on Tuesday.
Open interest in COMEX copper futures was 79,329 contracts as of Sept 28.
In London, copper for delivery in three months (MCU3: Quote, Profile, Research) rose to $8,280.25 a tonne, its highest since May 4 but later trimmed its losses and closed at $8,160 a tonne, up $70 from Monday.
Futures and options trading involve substantial risk.
