By Joe Wallace and Kirk Maltais

A work stoppage at a huge Chilean mine has failed to boost copper prices, indicating that investors are wary of betting on growth-sensitive commodities ahead of the G-20 summit in Japan in late June.

Unionized workers at Chuquicamata, which produced 1.5% of global copper output last year, went on strike on Friday after contract negotiations with management fell through. The disruption is likely to add to existing pressure on copper supply, but some investors are reluctant to buy the metal as long as trade tensions between the U.S. and China are clouding the outlook for the world economy.

Three-month copper futures on the London Metal Exchange, the global standard, have lost 1% over the past week despite the strike at Chuquicamata and are close to their lowest level in two years at $5,820 a ton. The metal is used in everything from electrical wiring to autos, so investors follow its price as a gauge of momentum in the world economy.

On the New York Mercantile Exchange, copper for July delivery, the most active contract, was recently up 0.8% at $2.65 a pound and has risen slightly over the past week.

Concerns that demand is flagging, and could take a further hit from U.S.-China trade tensions, are overriding the upward pressure on prices from stalling supply. Commerce Secretary Wilbur Ross told The Wall Street Journal on Sunday that presidents Trump and Xi Jinping are unlikely to strike a major trade deal if they meet at the summit in Osaka.

"Fundamentally copper's looking good," said Vivienne Lloyd, a metals strategist at Macquarie, referring to tight supply. "But it's not going to be able to escape the overwhelmingly bearish influence of the trade conflict."

Metal brokers say that trading is unusually thin, another sign that investors are avoiding making bets in either direction ahead of the G-20. So far in June an average of 40,887 three-month copper contracts have changed hands on each trading day on the LME, according to Refinitiv data, down from 58,547 in the same period last year.

Slowing economic growth in China is particularly worrying for investors given the country's voracious appetite for raw materials. Data showing that industrial production grew at its slowest pace in 17 years in May weighed on metals futures on Friday. Earlier this month, a survey of purchasing managers suggested that China's manufacturing sector was close to contracting.

Even before the Chuquicamata strike, Morgan Stanley estimated that global output of mined copper was running 3% lower than it was at this stage in 2018. The mine is run by state-owned Codelco, which declined to comment on the industrial action Monday.

There are several other squeezes on supply. In Zambia, the seventh-largest copper producer in the world, the government has moved to wind up Konkola Copper Mines, a subsidiary of London-listed Vedanta Resources Ltd. Vedanta declined to comment Monday, and is challenging the liquidation in court.

Glencore PLC said Monday that it will be shutting down production at its Mopani copper smelter in Zambia due to "a significant failure" in one of the facility's furnaces necessitating a "major refurbishment program" lasting until the end of this year.

There are also longer-term pressures on copper output. Apart from the restart of Glencore's Katanga mine in the Democratic Republic of Congo, no major new copper mining capacity was brought online in 2018, according to the International Copper Study Group. The intergovernmental organization expects global output of mined copper not to change this year after expanding 2.5% in 2018.

This supply backdrop should ultimately lead to higher prices, said Hakan Kaya, senior portfolio manager at Neuberger Berman. "Disruption from Chile or Zambia are wake-up calls for investors to realize how fragile the supply chains in this domain and how upside volatility may exist in the most unexpected times."

But for now, he added, "buyers cannot see forward and cannot commit, and no surprise they are more and more absent from markets."

--Ira Iosebashvili contributed to this article.

Write to Kirk Maltais at Kirk.Maltais@wsj.com

(END) Dow Jones Newswires

June 17, 2019 13:55 ET (17:55 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.