Copper prices edge higher

HUMEYRA PAMUK,  Reuters

LONDON — Copper eked out gains on Thursday, as an ongoing strike in the world's top copper producer underpinned prices, but a firm dollar weighed on prices, traders and analysts said.

Copper for three-months delivery on the London Metal Exchange was at $8,550/8,570 (U.S.) per tonne by 1008 GMT, up $10 from Thursday's close.

“We're going to see knee-jerk reactions to currency moves,” analyst Marc Elliott at Fairfax said, but added that the main driver for the market was the supply problem.

The dollar neared a one-month high against the euro, recovering from earlier losses after the Federal Reserve kept alive the possibility of further cuts after trimming interest rates as expected on Wednesday.

The dollar's move higher on Thursday was exacerbated in holiday-thinned trade in Europe.

“The dollar's movements have come more into focus as metals are tracking it,” an LME trader said.

However, supply disruptions, were still an important element which kept copper from falling, analysts said.

“If it weren't for the strike action in Chile I'd say copper would be somewhere below its current levels,” Fairfax's Mr. Elliott said.

Chilean copper giant Codelco, which produces around 1.7 million tonnes of copper a year, closed two smaller divisions, Salvador and Andina, 15 days ago due to the latest in a series of sometimes-violent strikes by subcontracted miners.

A company source on Wednesday said the miner kept its Teniente division, home to the world's largest underground copper mine, shut on Wednesday pending security improvements to counter strike violence.

Traders said this supports copper.

“We've not seen copper close below its 30-day moving average since the end of March. Since that time the price has tested that area, but bounced back,” the trader said, referring to around $8,250-8,500 per tonne.

Supply disruptions remain in focus but worries about demand due to a slowdown in the United States, have not gone away.

“Growth is however expected to decelerate going forward,” analyst Michael Jansen at JP Morgan said in a research note. “For metals this signals broadly a more difficult demand environment ahead,” he said.

On Thursday, investors will scrutinize April's Institute for Supply Management manufacturing index and weekly jobless claims to find out more clues about the health of the U.S. economy.

While the United States is going through a slowdown, China, the world's top consumer of metals, will be key.

“But as always the main question will be: will China continue to decouple from the wider economic environment,” Jansen said.

“Our view on this is that demand for primary metal has already decoupled significantly,” he added.

In other metals, three-month aluminum was up $8 at $2,915/2,920 a tonne, zinc edged down $5 to $2,225/2,245 per tonne.

Three-month nickel rose $200 to $28,700, though three-month lead dropped $49 to $2,665/2,675 a tonne.