Copper hits 2018 high on Chile supply fears

LONDON, June 7 (Reuters) – Copper hit its highest this year on Thursday, lifted by concerns over the potential for wage negotiations at the world’s biggest copper mine to disrupt supply, and by healthy appetite for cyclical assets as stock markets rallied. Union leaders at the Escondida mine in Chile operated by BHP submitted wage demands late last week, sparking fears of a possible strike. Failure to reach a labour deal at the mine during last year’s negotiations led to a 44-day stoppage at the facility, which accounts for 5 percent of global supply. Worries over fresh disruption have helped lift copper 5.5 percent this week. “This is mostly linked to fears that the wage negotiations at Escondida will turn into a prolonged strike, and therefore there will be some loss in output,” Capital Economics analyst Simona Gambarini said. However, robust stock levels and early indications that talks could be constructive suggest the current strength in prices may be overdone, she said, raising the risk of a pull-back. “We don’t expect this to last,” she said. “There is a lot of speculation in the market.” * COPPER PRICES: Three-month copper on the London Metal Exchange hit $7,299 a tonne, its highest since Dec. 28, before pulling back to $7,277.50 by 0947 GMT, up 0.8 percent. * SPREADS: The premium of three-month copper over the cash contract remained depressed at $6.50 a tonne, down from $22.25 two weeks ago. On Monday it touched its lowest since March 2017 at $1.75, signalling tightness in near-term supply. * COPPER STOCKS: On-warrant copper inventories at LME warehouses – representing metal not earmarked for delivery and therefore available to the market – increased by 6,625 tonnes to 237,275, exchange data showed on Thursday. * TECHNICALS: LME copper may test resistance at $7,305 a tonne, Reuters technical analyst Wang Tao said on Thursday, a break above which could lead to a gain to $7,373. * FINANCIAL MARKETS: World stocks hit a three-week high and the euro and German Bund yields also rose as investors priced in a potentially earlier-than-expected wind-down of stimulus from the European Central Bank. * ALUMINIUM: Aluminium was 0.3 percent lower at $2,337.50. * ALUMINIUM TECHNICALS: LME aluminium looks neutral in a range of $2,323-$2,341 a tonne, Reuters technical analyst Wang Tao said. A break above $2,341 could lead to a gain to $2,352. * OTHER METALS: LME zinc was down 0.3 percent at $3,184 a tonne, while lead was up 0.7 percent at $2,544 a tonne and nickel was 0.8 percent higher at $15,765 a tonne. Tin was up 0.8 percent at $21,140 a tonne.