Copper steadies as mine strike threat offsets dollar, oil strength

Copper experienced a brief respite on Tuesday as the potential for a mining strike in the leading producer, Chile, tempered fears that a strong dollar and high oil prices could dampen demand. The benchmark three-month copper price on the London Metal Exchange increased by 0.2% to $14,447 per metric ton in official open outcry trading.

However, it had dropped 1.4% on Monday, reaching its lowest level since September 17 due to weak Chinese industrial profits data. Despite indications of a slowing economy caused by the Iran conflict and oil prices surpassing $100 per barrel, copper still holds some upside potential, according to Panmure Liberum analyst Tom Price.

"That's really because the global market has been deprived of inventory because it continues to be transferred into the US," Price noted, attributing part of the reason to underperforming production in Chile. Copper stocks in the London Metal Exchange fell by 875 tons to 251,350 tons, though only around half are available to the market.

In the US, COMEX inventories surged for six consecutive days to over 700,000 metric tons for the first time ever, thanks to the potential for an import tariff in the coming year. In Chile, workers from two unions at Antofagasta's Centinela copper mine rejected a collective contract proposal on Monday, setting the stage for a strike.

Also, one of the unions at the massive Escondida mine rejected BHP's effort to prolong contract negotiations. The dollar reached several-month highs on Tuesday, making greenback-denominated metals more costly for investors using other currencies. Markets were pricing in a more than 70% chance of another Federal Reserve rate hike in October, which would be detrimental for base metals.

Traders are also waiting for manufacturing purchasing managers' data in China this week for additional demand cues. Restocking ahead of the week-long Chinese National Day holiday, which begins on Thursday, is largely finished, analysts at Galaxy Futures suggested. Aluminum fell 0.6% to $3,231 a ton, zinc rose 0.5% to $3,870, lead increased by 0.2% to $1,906, nickel declined 0.7% to $16,065, hitting its lowest since September 16, and tin rose 0.4% to $54,025.