Copper hits $8,000 on Chile strike

LONDON: Copper futures mounted an assault on $8,000 per tonne yesterday as the market reacted to the start of a strike at the world's biggest source of the metal.

More than 2,000 union workers began a strike at the Escondida mine in Chile after talks on a new wage contract failed despite 11th-hour government mediation, the union said.

Copper for delivery in three months on the London Metal Exchange touched $8,030 in early trade before the strike began, up $170 from Friday's closing price. It slipped in the middle of the day, but rose after the start of the strike and its closing price was $7,930.

Daily output at the mine has been cut to about 40% of normal by the strike, majority owner BHP Billiton said.

Though the walkout was well-flagged, few speculators would want to be sitting on short futures positions, a trader said.

Fund managers drawn to copper futures said tight supply and strong demand were the long-term driving factors.

"We will be buying it no matter what," a European fund manager with over $100mn in assets said.

"The performance of base metals has been huge, and we'll be increasing our base metals exposure again today."

At $8,000, copper is almost $1,000 below the record high it hit in May but more than four times more expensive than it was three years ago.

Lack of new supply and dwindling stocks meant little surplus metal was in the system, which would support prices, investment bank UBS said.

"We still see industrial metal prices peaking next year and favour copper, platinum and zinc," strategist John Reade said in a note.

Aluminium traded up to $2,570 per tonne, $31 above Friday's close, and gold reached $651.80 per ounce, up $7.80 from Friday's late quote in New York. Mining stocks fell in London as equity markets were dragged down by high oil prices.