METALS-Supply concerns, lower dollar spur copper to 16-month high

By Pratima Desai

LONDON, Oct 2 (Reuters) - Copper prices climbed to 16-month highs on Thursday as worries about shortages due to supply disruptions and a lower dollar outweighed weak demand prospects in leading consumer China.

Benchmark copper CMCU3 on the London Metal Exchange traded up 1% at $10,479 a metric ton in official rings from an earlier $10,520.5, the highest since May last year when prices of the industrial metal hit record highs above $11,100 a ton.

Latest on supplies came from Indonesia where Freeport-McMoRan's FCX.N Grasberg operation suspended operations on September 8 after a deadly mud slide. The suspension at Grasberg follows other large disruptions this year including Kamoa-Kakula in the Democratic Republic of Congo and El Teniente mine in Chile.

"Copper is also rising because of the dollar, which is under more pressure because of the U.S. government shutdown. It was already under pressure from tariff issues and the U.S. economy slowing," said Panmure Liberum analyst Tom Price.

A lower U.S. currency makes dollar-priced metals cheaper for holders of other currencies which could boost demand for industrial metals.

The U.S. government has shut down much of its operations after partisan divisions prevented Congress and the White House from reaching a funding deal.

Factory activity shrank in much of the world last month, private surveys showed this week as signs of a slowdown in U.S. growth and the anticipated impact of President Donald Trump's tariffs added to pressure from weak Chinese demand.

Focus was also on zinc stocks in LME registered warehouses which at 40,350 tons have dropped 66% since the middle of July to their lowest since March 2023 MZNSTX-TOTAL.

Concerns about the availability of zinc on the LME has fuelled a surge in the premium for the cash contract over the three-month forward to three-year highs around $80 a ton compared with a $6 discount in July CMZN0-3.

Three-month zinc CMZN3 was up 1.1% at $3,020 after earlier hitting a nine-month high at $3,032 a ton.

In other metals, aluminium CMAL3 climbed 0.6% to $2,704.5, lead CMPB3 rose 0.4% to $2,018.5, tin CMSN3 advanced 0.8% to $36,300 and nickel CMNI3 added 0.6% to $15,280 a ton.

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