Copper Rises as Strike at World’s Biggest Mine in Chile Spurs Supply Woes

Copper rose after BHP Billiton Ltd. canceled shipments from Chile’s Escondida mine, the world’s biggest source of the metal, as a strike extended to seven days.

Workers vowed to step up efforts to secure improved bonuses and benefits as management called the strike illegal and refused to negotiate. Prices also gained after Kazakhmys Plc (KAZ) and OAO GMK Norilsk Nickel reported lower copper output.

“Near term, we’ve got supply tightness with the strike at Escondida,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said yesterday in a telephone interview. “Longer term, we’re looking for Chinese buying to pick up. There’s also underlying demand from the U.S. and Japanese auto industry.”

Copper futures for September delivery rose 2.3 cents, or 0.5 percent, to close at $4.4695 a pound at 1:14 p.m. on the Comex in New York. The metal has climbed 38 percent in the past year, reaching a record $4.6575 on Feb. 15, as mining companies struggled to keep pace with rising consumption.

The price may rise to $5 by the end of the year, Lesh said. China is world’s leading copper user, followed by the U.S.

World demand may exceed output by 377,000 metric tons this year, according to the International Copper Study Group. The strike at Escondida has cut output by about 15,000 tons, Barclays Capital said in a report.

Copper also gained as jobless claims in the U.S. dropped last week to a three-month low, and the number of contracts to purchase previously owned U.S. homes unexpectedly rose in June, bolstering prospects for the economy and metal demand.

On the London Metal Exchange, copper for delivery in three months rose $35, or 0.4 percent, to $9,814 a ton ($4.45 a pound).

Nickel also gained in London. Aluminum, lead, tin and zinc fell.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net