Copper climbs on China stimulus hopes, Chile mine supply risks

Copper prices rose 1% to more than $14,600/metric ton on the London Metal Exchange on Monday, extending gains on hopes for stronger Chinese demand and concerns over supply disruptions.

The cash price of copper reached a premium of $170/ton to benchmark three-month prices, the highest since early September, an indication of a shortage of immediate supply.

"Stronger-than-forecast Chinese industrial activity, improving credit demand, and accelerating infrastructure expenditure could reinforce expectations of higher copper consumption," Zaye Capital Markets analyst Naeem Aslam said in a note, pointing to China's plan to tap 550B yuan in additional government debt and allocate funds to areas such as infrastructure.

Supply concerns are also supporting prices, with a strike at Chile's Centinela mine and potential labor action at Escondida adding to uncertainty.

"We believe supply developments in Chile, Peru, and Indonesia will remain equally important, particularly as mining disruptions and operational constraints threaten production availability," although weaker U.S. consumer sentiment and persistent inflation concerns could limit gains by clouding demand prospects and keeping monetary policy restrictive, Aslam wrote.

Two workers died Sunday after a snow avalanche struck Codelco's giant El Teniente copper mine, where open-pit operations had already been stopped due to bad weather.

Potentially relevant stocks include Freeport McMoRan (FCX), Southern Copper (SCCO), Hudbay Minerals (HBM), Ero Copper (ERO), Teck Resources (TECK), BHP (BHP), Rio Tinto (RIO).