Jul. 27 (Bloomberg) –Copper may extend its biggest rally in almost three weeks on speculation a strike at Chile's Escondida mine may reduce global supplies and as the dollar fell amid a political stalemate over raising the U.S. debt ceiling.
The metal for three-month delivery added as much as 0.4 percent to $9,859.75 a metric ton, the highest price since July 19 on the London Metal Exchange before trading at $9,8542.25 by 3:25 p.m. Tokyo time. The price rose 1.7 percent yesterday, the biggest daily gain since July 7. October-delivery copper on the Shanghai Futures Exchange closed unchanged at 72,810 yuan ($11,302) a ton.
BHP Billiton Ltd. (BHP) is refusing to negotiate with workers at its Escondida unit as a strike at the biggest copper mine continues. The union's rejection of a 2.8 million-peso ($6,100) discretionary bonus offer and ensuing "illegal" strike is a "disappointment" and is costing Chile "a lot of money," Peter Beaven, head of BHP's base metals division, said yesterday.
"Copper prices will continue to get support from the weaker dollar and the strike in Chile," said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul. "The copper market saw light selling in early morning trade against yesterday's gain."
Copper stockpiles on the LME-registered warehouses fell 0.5 percent to 469,100 tons yesterday, declining for a third day after reaching 474,050 tons on July 21, the highest level since June 22.
"Extended labor strike action at Chile's largest copper mine (Escondida) reconfirmed a tight copper market view," Australia & New Zealand Banking Group Ltd. analysts including Mark Pervan wrote in a note today.
HSBC Holdings Plc raised its 2012 copper price forecast by 13 percent to $3.86 a pound. The bank also increased its estimate for copper deficit in 2011 to 143,000 tons from 70,000 tons, analysts led by Andrew Keen said in a report e-mailed on July 21. World demand is set to exceed output by 377,000 tons this year, according to the International Copper Study Group.
The Dollar Index was little changed against six major currencies after touching the lowest level since May 5 as U.S. politicians remain deadlocked after a House vote on Speaker John Boehner's two-step plan to raise the debt ceiling and pare the deficit was postponed from today. The Obama administration threatened a presidential veto.
Aluminum rose 0.9 percent to $2,672.75 a ton, gaining for a fifth day, after touching $2,674 earlier, the highest price since June 9.
Zinc was little changed at $2,532 a ton after reaching $2,536 earlier, the highest price since April 11. Nickel advanced 0.6 percent to $24,249 and lead climbed 0.8 percent to $2,740.75 a ton. Tin added 0.2 percent to $28,650 a ton.