SINGAPORE, May 10 (Reuters) Copper prices hit a new high near $8,000 a tonne as investment funds dominated in a market fuelled by strong demand and concerns over supply disruptions, driving Shanghai futures higher.
Wednesday's gains in London Metal Exchange's flagship copper contract came after Grupo Mexico announced it would close one of its copper, silver and zinc mines, and amid an expected decline in production at a copper mine in Chile.
By 0400 GMT, LME copper for delivery in three months was up $95 or more than 1 percent at $7,910/$7,940 a tonne, topping Tuesday's all-time high of $7,875.
''We are marching towards $8,000,'' said Shen Haihua, vice president of Maike Futures in Shanghai. ''It should be achieved.
A little bit crazy but do not see any negative factors.'' LME copper gained $185, or 2.4 percent, to close at $7,815 on Tuesday, as investors flocked into the hot commodities sector, pushing zinc and platinum up to record highs, aluminium to a new 18-year peak and gold to a 25-year high above $700 an ounce.
''Fund investments have added a lot of extra heat to the market,'' said David Thurtell, commodity strategist at the Commonwealth Bank of Australia.
Copper, used in wiring, tubing and coins, has gained as much as 80 percent this year and has increased more than fivefold since 2001.
That compared with a gain of about 6 percent so far this year in the Standard &Poor's 500 Index, 8.6 percent in the Dow Jones industrial average and a 5.1 percent annual yield on 10-year U.S.
Robust global demand, labour unrest and supply disruptions at copper mines in Mexico and elsewhere lent support, while shortages of skilled labour and mining equipment were hampering efforts by producers to bring on new capacity.
In supply news, Grupo Mexico will close its San Martin copper, silver and zinc mine because it says local government has refused to break up a long strike, the latest in a barrage of body blows for the company.
Chile's Los Pelambres copper mine, owned by Antofagasta Plc, said on Tuesday it expects to produce 319,000 tonnes of copper this year, down 4.4 percent from last year.
With gains in London copper prices, Shanghai copper futures jumped by their daily upper trading limits to a record.
Shanghai's active contract July, rose 4 percent, or 2,920 yuan, from the previous settlement to 76,110 yuan ($9,490) a tonne before ending the morning session at 75,990 yuan.
Shanghai's active July aluminium futures closed the morning session up 510 yuan from the previous close at 22,480 yuan a tonne.
LME aluminium was at $2,995/$3,005 a tonne, against the previous London close of $3,013. On Tuesday, aluminium reached $3,029.5, an 18-year high.
Alcoa Inc., the world's No. 1 aluminium producer, sees strong demand running well into the future and keeping prices high, barring a major unforeseen event like a Chinese recession or a terrorist act, Chairman and CEO Alain Belda said on Tuesday.
Speaking to analysts at the Merrill Lynch Global Metals, Mining and Steel conference in Florida, he said strong demand has been primarily driven by the urbanisation of large populations in countries such as China and India.
In other LME metals, zinc was at $3,460/$3,480 a tonne versus $3,475. On Tuesday, it set a record $3,503.
In the mining sector, the world's top miner BHP Billiton at one stage rose 3.1 percent to a record A$31.97 and Rio Tinto gained 2.6 percent to A$86.79, while Zinifex Ltd., the world number-two zinc miner, was up 4.9 percent at A$13.01.
Metal Prices by 0400 GMT LME ($/tonne), SFE (yuan/tonne) and COMEX (US cents/lb) Metal Last Net Change Pct Move LME Cu 7910.00 95.00 +1.22 SHFE Cu* 75990.00 2690.00 +3.67 LME Alum 2995.00 -18.00 -0.60 SHFE Alu* 22480.00 510.00 +2.32 COMEX Cu** 369.60 0.00 +0.00 LME Zinc 3460.00 -15.00 -0.43 LME Nickel 19800.00 -100.00 -0.50 LME Lead 1270.00 -10.00 -0.78 Change so far in 2006 Metal Latest bid End prev year Pct Move LME Cu 7910.00 4395.00 +79.98 SHFE Cu* 75990.00 41720.00 +82.14 LME Alum 2995.00 2276.00 +31.59 SHFE Alu* 22480.00 19360.00 +16.12 COMEX Cu** 369.60 204.20 +81.00 LME Zinc 3460.00 1905.00 +81.63 LME Nickel 19800.00 13500.00 +46.67 LME Lead 1270.00 1051.00 +20.84 LME Tin 9400.00 6475.00 +45.17 * 3rd contract months for SHFE copper and aluminium.
** 1st contract month for COMEX copper.
($1=8.02 yuan) REUTERS CS RN1202