Business

Fri Apr 18 20:11:39 PDT 2008

By Anna Stablum

LONDON, April 17 (Reuters) – Tin hit a fresh record high on Thursday, while copper edged up following a strike in Chile which could push prices to new records, analysts said.

Three-months copper gained $40 to $8,760/8,780 per tonne by 0902 GMT, after rallying 3.4 percent on Wednesday after Chilean subcontract workers started a strike at top producer Codelco’s divisions over working conditions and pay.

Earlier copper hit an intraday high of $8810 a tonne, within a whisker of its all-time high of $8,820 set in March.

"It is very likely that we see copper going through to a new high, just the supply side alone is probably enough to generate a new high," analyst Michael Jansen at JP Morgan said.

He said demand for copper, used widely in construction and power, would determine how much further prices would rise. Recently the market has been torn between a soft demand picture in the United States, which could spill over to the rest of the world, and robust demand growth from emerging markets.

Tin for delivery in three months was trading at $21,650/21,750 per tonne, up from $21,450/21,500 on Wednesday.

Tin, the star performer on the LME, has risen by over 30 percent this year to an all-time high of $21,700 on dwindling stocks and supply woes at top producers Indonesia and China.

"It is unlikely the supply side issues will disappear anytime soon," Jansen said, adding the price could go higher. Earlier in the week Indonesia, the world’s second largest producer, said it would restrict its output of tin. On Wednesday a state analyst said China, the top producer, might see its net exports fall by 43 percent year-on-year in 2008.

The two countries account for almost two thirds of world tin output, analyst David Thurtell at BNP Paribas said.

Inventories in LME warehouses have fallen by over 30 percent so far this year to levels last seen two and a half years ago.

The tight stock levels moved the market into backwardation — the extra money paid for cash metal over the three-months price — at $70 per tonne earlier in the week.

But Wednesday’s stock rise higher, up by 415 tonnes to 8,395 moved the market back into contango, giving investors a discount of around $10. On Thursday stocks fell again by 70 tonnes.

COPPER STRIKE

In copper, investors digested the news that it was only parts of the Codelco operations that were shutdown and analysts tried to figure out what the market implications might be.

"Copper seems to have cooled a bit on news that only Andina and Salvador is affected by the contractors strike," Thurtell said.

The Chilean strike at all of state-owned Codelco’s divisions over work conditions and pay, forced the copper producer to close its Andina and Salvador divisions on Wednesday.

However, Codelco said its Codelco Norte, Teniente and Ventanas divisions were operating normally.

Copper prices softened in early trade, hitting an intraday low of $8,615, down 1.2 percent as rising production in China weighed on sentiment, Jansen said.

China’s production of industrial metals rose in March, with copper rising 19 percent on the month due to a longer month and smelters’ output resumption after snowstorms.

"The Chinese production numbers are pretty solid … I don’t think we will see the same magnitude of increase but production will continue to push higher," Jansen said.

Aluminium was at $3,083/3,088 a tonne versus $3,069 on Wednesday, lead rose $9.5 to $2,875/2,885 and nickel gained to $29,900/30,100 up from $29,775/29,800.

Zinc shed $4 to $2,345/2,355.

(Editing by Peter Blackburn)

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