The threat of labor disputes may be enough to offset demand uncertainties and re-ignite speculative interest in base metals this month, South Africa-based Standard Bank Group Ltd. (SBK.JO) said Wednesday.

"A reawakening of the copper bull has the potential to set the whole base metals complex off and running again," the bank's metals analysts said in a report.

After May's dramatic highs and June's lows, base metal markets consolidated in July as uncertainty over demand, especially in the U.S. and China, damped bullish sentiment derived from the threat of labor disputes at major mines.

Thin trading volumes, due to the onset of summer in the Northern Hemisphere, exacerbated the choppy trading conditions in July, which Standard Bank expects to continue in August.

However, the threat of strikes, accidents and production shortfalls could provide the trigger to attract speculators back into the market, they said.

BHP Billiton's (BHP) giant Escondida copper mine in northern Chile is facing a strike from Aug. 7 unless it brokers a last-minute wage compromise with unions.

According to some analysts, a strike at Escondida, the world's largest privately owned copper mine, could trigger industrial action at other major mines in the region.

Labor contracts are coming up for renewal at BHP's Antamina mine in Peru as well as Chile's state-owned mines and Falconbridge Ltd.'s (FAL) Altonorte smelter.

"To put the severity of the situation into perspective, some 15-20% of world production capacity is, or will be, exposed to the threat of labor unrest at some point in the second half of this year," Standard Bank noted.

In addition, disruptions continue in Zambia where rioting has impacted operations at the Chambishi mine, while Chile's state-owned giant mine Chuquicamata has suffered a rock fall at a time when global London Metal Exchange stocks stand at just three days of global consumption.

Standard Bank expects LME copper prices to average US$7,700 a metric ton in August, close to the level at which they are currently trading, warning however that volatility will persist as the market responds to economic data, inflation indicators and whether or not miners take industrial action.

Key support is close to US$6,400, while key resistance is around $8,200, it said.

For nickel, the bank said extreme volatility is inevitable and new high prices possible in the coming months.

LME three-month nickel is currently trading around US$25,800 a ton, down from mid July's US$27,000 all-time high as resurgent stainless steel demand continues to shrink global stocks.

The nickel market is expected to settle down later this year once current tightness has passed, Standard Bank said.

For aluminium, the outlook is less favorable as surging supply, especially from China, offsets still solid demand and a lower trend in global stocks, it said.