new record high UPDATE 4-Funds lift London copper price 8 pct to...

new record high UPDATE 4-Funds lift London copper price 8 pct to new high
Thursday 4 May 2006, 3:37pm EST

By Nick Trevethan

LONDON, May 4 (Reuters) - London copper prices soared over 8 percent on Thursday to a new record high, supported by a positive outlook from miner BHP Billiton, dealers said.

"It is a bull market, that's why people are buying it. You don't sell into it," a system-based fund source said.

London Metal Exchange copper for delivery in three months closed at $7,650 a tonne on Thursday, against the previous day's London close of $7,110. In afternoon trade it hit a record $7,700.

"No one has ever seen copper rally $600 in a day before, it has been fund buying. $10,000 has been talked about for several months now, so no one would be surprised if it trades there," a dealer said.

At the New York Mercantile Exchange's COMEX division, the benchmark July contract surged 17.45 cents, or almost 5.3 percent, to settle at $3.4795 a lb, after dealing from $3.2735 to a new life-of-contract peak at $3.5050.

Dan Vaught, futures analyst with A.G. Edwards, noted Wednesday's rebound in the COMEX copper market may have set the stage for the breakout to the upside Thursday, with comments from BHP Billiton adding to the upward momentum.

"I certainly think the talk from BHP and the industry about the limited future supplies played a big role in this, but I think it is also quite a bit of technical buying in here as well," Vaught said.

John Crofts, BHP Billiton (BLT.L: Quote, Profile, Research)(BHP.AX: Quote, Profile, Research) base metals marketing director, said prices were unlikely to fall until stocks rise from current low levels.

"Until stocks are rebuilt, we would not expect prices to fall to more normal levels," Crofts said. [nL04407614]

LME stocks of copper were 115,975 tonnes on Thursday, equivalent to around two days of global consumption and down from just under 1 million tonnes in April 2002.

"Investors are looking at any excuse to drive the market higher. This is nothing new. Bullish talk from the producers, stock concerns and strong data mean the funds are buying," Man Financial analyst Edward Meir said.

Fundamentally, the dwindling inventory levels, robust global demand, labour unrest and supply disruptions at copper mines in Chile, Mexico and elsewhere kept lending support, while political involvement in Bolivia's mining sector fuelled concern.

Shortages of skilled labour and mining equipment were hampering producer efforts to bring on new capacity.

"Putting a figure on the losses to production caused by labour and equipment shortages is very difficult," an analyst at UK-based metals and mining consultancy CRU, said.

"What we can say is that while it usually takes 2 to 2-1/2 years from initial development of a mine to first metal, that could now take between 3 and 3-1/2 years."