(Reuters) - Asarco, the mining company controlled by industrial conglomerate Grupo Mexico, is planning to restart its mothballed copper smelter in the United States as prices for the red metal hit record highs, two sources with direct knowledge of the company's plans told Reuters.

Asarco, first bought by Grupo Mexico in 1999, is in negotiations with unionized workers to restart the Hayden smelter in Arizona and nearby copper mines, as well as the Amarillo refinery in Texas, the sources said.

Reopening Hayden would boost supply of the key red metal across the country - which uses twice the amount of refined copper it produces because it only has two domestic smelters: Freeport McMoRan's's Miami smelter in Arizona and Rio Tinto's Kennecott smelter in Utah.

The sources said recent copper price rallies motivated Asarco to restart Hayden given an acute need for copper smelting in the United States.

Mexico City-based Grupo Mexico declined to comment.

Copper demand is expected to grow steadily in coming years, fueled largely by the global clean energy transition and the rising use of artificial intelligence. Recent price jumps, though, appear to be driven in part by speculative activity.

The most traded front month copper contract on the Chicago Mercantile Exchange, also known as Comex, has gained 24% since January, hitting a record $5.1985 per pound this week.

The Comex rally, outpacing moves on the London Metal Exchange and Shanghai Futures Exchange, was driven by a speculative spree that forced those who had bet on prices falling to cover their positions.

Traders, including Trafigura and IXM, have been scrambling to ship metal to CME warehouses in the United States to cover short positions, but copper produced in China - which smelts half of the world's copper, is not CME-deliverable. Russian copper, which accounts for 60% of LME inventory, is also not eligible for U.S. delivery.

MOTHBALLED

Asarco's smelter, located about 100 miles (161 km) southwest of Phoenix, has not been fully operational for more than four years after a labor strike by its unionized workforce. It has widespread environmental damage and is considered a "Superfund" hazardous waste site by the U.S. Environmental Protection Agency.

It was not immediately clear when Asarco plans to officially restart smelting operations, but the company is in negotiations now with a union representing mining and smelting workers, according to one source. Asarco is focused on finalizing a contract with miners first and then staff for the smelter, the source added.

The company last June filed for an extension of the smelter's air quality permit - which had been set to expire in December - with state and federal officials, a request that is under review.

Asarco recently hosted a delegation from Peru, the world's second-largest copper producing nation, at the facility, one source said.

Concentrates from Asarco's nearby Ray and Mission mines are sold now mainly to Chinese smelters.

When last operational, Hayden had an annual capacity of 300 million pounds (136,078 metric tons) and processed copper extracted from the Ray mine.

By resuming full operations at the Hayden smelter, Asarco would be able to process that concentrate into a product known as copper cathode that can be used by its refinery in Amarillo, Texas, to make wire rod and other products.

Asarco's "RAY" and "ATR" branded copper cathodes could be delivered onto Comex for contract settlement.

The plans also underscore tight global supply of copper concentrates, a form of crushed, flotated ore used by smelters to make copper.

Treatment charge, an indicator of copper concentrates availability, flipped to negative for the first time ever in April.

The United States produced 880,880 metric tons of refined copper last year, according to the International Copper Study Group, although it imported 770,900 metric tons and consumed over 1.6 million metric tones of refined copper.