METALS-Copper ends flat; strong fundamentals limit losses

Mon Nov 8, 2010 3:01pm EST

* Copper buoyed by weak long-term dollar outlook

* Long Collahuasi strike may hit copper output

* Coming up: U.S. wholesale inventory data on Tuesday (Recasts with New York closing copper price, adds New York dateline/byline and analyst comments)

By Chris Kelly and Pratima Desai

NEW YORK/LONDON, Nov 8 (Reuters) - Copper steadied below two-year highs by Monday's close, bucking the negative impact of a stronger dollar, as investors bought the industrial metal as an inflation hedge and amid concerns over supply tightness.

Benchmark copper CMCU3 on the London Metal Exchange ended at $8,660 a tonne, unchanged from the close on Friday when the price rallied to $8,769.50, its highest since July 2008.

At the COMEX metals division of the New York Mercantile Exchange, copper for December delivery HGZ0 rose 0.80 cent to settle at $3.9565 per lb, away from Friday's 27-month peak at $3.9955.

With spill-over support from the precious metals complex, copper held firm in the face of a stronger dollar, as budget problems in Ireland weighed against the euro. [USD/]

"I think the biggest factor here is that investors pretty much have made up their minds that they're going to buy commodities regardless of what the dollar is doing in the short term," said Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida.

Follow-through momentum from last week's surprisingly strong U.S. jobs data and the Federal Reserve's $600 billion bond-buying program aimed at lowing interest rates and reinvigorating the world's largest economy kept the red metal's upside intact.

U.S. bank Citi said it had raised its short- to medium-term forecasts for base metals prices to reflect tighter demand-and-supply dynamics and a weaker dollar. [ID:nLDE6A716C]

Even a 4 percent rise in third-quarter output at some of the world's top copper mines failed to alter the market's widely held view that demand will continue to outpace production growth.

(Graphic: r.reuters.com/xyk83q )

Ratings agency Moody's said the global base metals recovery would continue. [ID:nWNA3919]

REPLACEMENT WORKERS AT COLLAHUASI

Additional support for copper came from a strike by union workers at Chile's Collahuasi, the world's No. 3 copper mine, which headed into a fourth day on Monday with no visible impact on output yet as wage talks remained stalled. [ID:nN08196106]

Replacement workers have helped maintain normal mine output, but industry sources said production could be affected if the strike extended beyond one week. [ID:nN05111737]

The operator has not said how long it can keep operations running with the replacement workers.

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Graphic on copper supply:

r.reuters.com/req72q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Also in focus are copper exchange-traded products that give investors exposure to physical metal. [ID:nN27567082]

The launch of a copper ETP could take a large chunk of the metal out of an already tight market. Analysts expect the copper market, estimated at 19 million tonnes, to be balanced or see a small deficit this year. [MET/POLL]

Among other metals, three-month aluminum CMAL3 was untraded at the close but last bid at $2,429 a tonne from $2,452 on Friday. Traders said news that China's State Reserves Bureau recently sold 95,767 tonnes of primary aluminum from its stockpiles was weighing on prices. [ID:nTOE6A703V]

Zinc CMZN3 ended down $49 at $2,479 a tonne and lead CMPB3 shed $2 to close at $2,504. Tin CMSN3 was untraded at the close but last bid at $26,595 from $26,440, while nickel CMNI3 fell $325 to $24,125. Metal Prices at 1836 GMT COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2009 Ytd Pct move COMEX Cu 394.95 0.10 +0.03 334.65 18.02 LME Alum 2430.00 -22.00 -0.90 2230.00 8.97 LME Cu 8660.00 0.00 +0.00 7375.00 17.42 LME Lead 2510.00 4.00 +0.16 2432.00 3.21 LME Nickel 24100.00 -350.00 -1.43 18525.00 30.09 LME Tin 26500.00 60.00 +0.23 16950.00 56.34 LME Zinc 2475.00 -53.00 -2.10 2560.00 -3.32 SHFE Alu 16845.00 -160.00 -0.94 17160.00 -1.84 SHFE Cu* 66380.00 -670.00 -1.00 59900.00 10.82 SHFE Zin 20305.00 -590.00 -2.82 21195.00 -4.20 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Editing by William Hardy and Dale Hudson)

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