BASE METALS: Comex Copper Hits Three-Month High On Weaker Dollar

Jul 26, 2011 (Dow Jones Commodities News via Comtex) -- --Weaker dollar boosts industrial bellwethers copper, crude oil

--Labor strike continues at Chile's Escondida mine

--Outlook uncertain as copper creeps toward records above $4.60/lb

By Matt Day
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Stalled talks to raise the U.S. debt ceiling weighed on the dollar Tuesday, boosting copper futures to their highest levels since early April.

Copper for September delivery, the most actively traded contract, settled up 7.15 cents, or 1.6%, at $4.4780 a pound on the Comex division of the New York Mercantile Exchange, the highest ending price for a most-active contract since April 11.

Leaders in the House of Representatives and Senate continued to press forward with separate plans to raise the U.S. borrowing limit, again failing to come together behind unified deficit-cutting legislation. The Treasury Department has said Congress must vote to raise the U.S. debt ceiling by Aug. 2, or it won't be able to make all of its scheduled payments.

Worry that the U.S. government may face a downgrade or temporary default pushed the dollar sharply lower Tuesday and lifted copper. A falling dollar can boost dollar-denominated copper by making the futures cheaper for buyers using other currencies.

The ICE U.S. Dollar Index, which tracks the currency against those of some major U.S. trading partners, was at 73.591 at the Comex settlement, down from 74.108 late Monday in New York. The index hit its lowest reading in more than a month Tuesday.

The weaker dollar also helped fuel gains in crude oil, another closely watched industrial commodity, with Nymex futures touching one-month highs above $100 a barrel.

"The a weaker dollar is benefiting the metals, but copper is probably near the top of its range here," said Matt Zeman, head of trading with Kingsview Financial.

Futures have climbed to within striking distance of February's record highs above $4.60 a pound, despite the drag from worries that high debt in the U.S. and Europe would rattle global markets and sap demand for commodities. Copper is sensitive to the economic outlook because of its widespread use in manufacturing and construction.

While copper's rise Tuesday came primarily because of the weaker dollar, futures also gained support from the ongoing strike at the world's largest copper mine, Standard Bank analyst Leon Westgate said in a note. Copper prices have been supported for much of the past year by the widely held view that mine-production growth would fail to keep up with rising demand, and weather- and labor-related supply shortfalls in Chile have brightened sentiment among copper traders.

Workers at Chile's Escondida mine, which is majority controlled by BHP Billiton Ltd. (BHP, BHP.AU), stopped work Thursday to protest what they said were breaches of their contract.

BHP confirmed Tuesday that it had offered miners a bonus to end the work stoppage, but the chief union rejected the offer and voted to strike. It was also reported that BHP turned down the local government's offer to mediate talks between the parties.

The mine stands to lose 3,000 tons of copper output for every day workers are on strike. Government-hosted talks were scheduled for Tuesday.

Chile is the world's largest copper miner, accounting for about 30% of global supply.

Copper settlements (ranges include electronic and pit trading):
July $4.4740; up 7.25 cents; Range $4.4315-$4.4780
Sept $4.4780; up 7.15 cents; Range $4.3955-$4.4850