Copper trading outlook: futures hit two-week high on mine strikes, weaker dollar

Copper rose for a fourth day and held near the highest level in two weeks as news for upcoming strikes at two major mines, coupled with expectations of higher Chinese demand, eased speculations for an expanding supply surplus. A weaker dollar was also beneficial.

Comex copper for delivery in December traded 0.67% higher at $3.0845 per pound at 13:10 GMT, having earlier touched a two-week high of $3.0930. The industrial metal rose by 0.76% on Thursday to $3.0640, marking its third straight daily gain.

The metal extended its advance after a Freeport-McMoRan Inc. union official said yesterday that workers at the Grasberg mine in Indonesia will hold a one-month strike, starting November 6th, due to management issues related to a fatal accident.

Meanwhile, workers at the biggest copper mine in Peru, Antamina, which is owned by BHP Billiton, Glencore Xstrata, Mitsubishi and Teck, will walk out indefinitely as of November 10th, Reuters reported on Friday. This would bring offline a total capacity of 30 000 tons per month.

Also helping push the market up were rumors that China’s State Reserve Board has resumed purchasing copper. Citi analysts said yesterday in a note: “LME Week brought speculation that the Chinese SRB has once again begun buying copper. We believe the SRB is likely to buy this quarter in size exceeding the 200 000-300 000 tonnes purchased in March-April.”

The metal also drew support on the demand side after industrial profits in China rose by an annualized 0.4% in September, partially offsetting a 0.6% decline in August.

Last week, a preliminary gauge showed industrial production and activity in Chinas manufacturing sector expanded more than expected, while the Eurozone also posted slightly better-than-projected data, although the picture in the single currency bloc remains grim.

US dollar

A weaker dollar also helped push the red metal up. The dollar fell after the Department of Commerces Census Bureau reported that durable goods orders in the US unexpectedly dropped in September on lower demand for machinery and computers.

Bookings for goods meant to last more than three years fell 1.3% on a monthly basis in September, following an upward-revised 18.3% decline in August. Analysts had projected a 0.5% gain.

Core durable goods orders, which exclude bookings for the more volatile transportation items, fell 0.2% after a 0.7% jump in August, defying analysts projections for a 0.5% jump. Orders for non-defense capital goods excluding aircraft, a gauge for future business investment in items such as engines, computers and communications equipment, fell 1.7%, the most since January, following a downward-revised 0.3% gain in the preceding month.

A separate report showed that home prices in 20 US cities rose at a slower pace in the year ended August. The S&P/Case-Shiller House Price Index registered a 5.6% gain in August from a year earlier, compared to a 6.7% jump in the year ended July. Analysts had projected a 5.8% increase. Month-on-month, prices were up 0.2%, trailing a projected 0.5% advance.

The US dollar index for settlement in December fell to a one-week low of 85.290 after the release of the data and stood at 85.375 at 13:10 GMT, down 0.22% on the day. The US currency gauge slid 0.3% on Monday to 85.561.

Market players looked ahead at the Conference Boards report on US consumer confidence in October, with the respective index projected to come in at 87.0 compared to 86.0 in September.

Investors also awaited the conclusion of the Federal Open Market Committees seventh meeting this year, where policy makers are expected to end Fed’s monthly bond-buying program. Investors will be paying close attention to Janet Yellen’s after-meeting statement, looking for hints about a rate increase and the central bank’s opinion on the global economy.