Copper rises on LME as supply concern persists

Copper rose for a second consecutive session in London as investors speculated the worst may be over in a global equity slump and a strike by miners in Mexico intensified. Lead paced gains among other metals.

The Morgan Stanley Capital International's World Index gained 0.7 per cent today, extending a rally that began at the end of last week after the US Federal Reserve cut its discount rate.

Mexico's miners' union said at the weekend a court allowed it to continue a strike at Grupo Mexico SAB's San Martin mine, the third favourable ruling the union has won.

A demonstration also took place at Cananea, Mexico's largest copper mine.

"Copper looks the most vulnerable in terms of supply at the moment," Alex Heath, head of base metals trading at RBC Capital Markets in London, said in a phone interview. Lead and zinc also have shrinking stockpiles, he said.

Copper for delivery in three months on the LME added $60, or 0.9 per cent, to $7,070 a tonne as of 10:36 a.m. The contract fell 5.9 per cent last week, the largest in three months.

The metal, used in wires and tubes, has gained 25 per cent this year as miners produced less concentrate, the raw material smelted into copper, because of labour disputes and a decline in ore quality. The index tracking the six metals traded on the London Metal Exchange ended last week at the lowest in six months, mirroring declines in stocks on concern that rising US subprime mortgage defaults will spread to other markets and cut demand for metals.

LME-monitored inventories of copper increased 475 tonnes, or 0.4 per cent, to 121,025 tonnes, the exchange said today in a report. They have declined 34 per cent this year. "If copper stockpiles fall again, prices will rise," Heath said.

Lead stockpiles dropped 500 tonnes, or 1.8 per cent, to 27,750 tonnes, the lowest since March 30, 1990. The metal for three-month delivery rose $65, or 2.3 per cent, to $2,955 a tonne.

Among other LME contracts, aluminum climbed $12 to $2,507 a tonne, nickel advanced $300 to $26,300, tin rose $400 to $13,900 and zinc was up $30 at $3,100.