DJ BASE METALS: Comex Copper Up On Strike Threat, Stock Draws
By Allen Sykora
Of DOW JONES NEWSWIRES
Copper futures rallied Monday as continuing exchange inventory drawdowns and
a strike threat against Grupo Mexico more than offset the apparent end of a
potential labor problem at Codelco, analysts said.
The most-active July copper contract rose 6.30 cents to settle at $3.4680 per
pound on the Comex division of the New York Mercantile Exchange.
"It's a reflection of some of the labor problems, along with the ongoing
decline in (warehouse) stock levels, both in China and on the LME," said
Stephen Platt, analyst with Archer Financial Services.
Copper stocks in Shanghai Futures Exchange warehouses fell 3,773 metric tons
in the most recent reporting week, Friday data showed. Meanwhile, London Metal
Exchange stocks fell 3,550 metric tons from Friday to Monday, the 10th straight
decline and leaving the total at 123,900.
"That helped to offset the conclusion of a potential strike at Codelco," said
Catherine Virga, analyst with CPM Group. "The demand is still there."
The seasonally slow summer period does not appear to have kicked in yet,
analysts said.
Workers at Codelco's Radomiro Tomic copper mine in Chile voted over the
weekend to accept an early contract offer from the company.
However, workers have threatened a June 10 strike against nine Grupo Mexico
mines and plants, including the Cananea copper complex.
"Underlying demand is still rather strong," Platt said. And that means any
labor disruptions could send prices higher, he continued.
Virga commented that copper hasn't risen more dramatically since there is
still potential for the Grupo Mexico issue to be resolved without a walkout.
The market will continue monitoring the situation, and if the talks do not
appear to go well, copper could push still higher, she said.
Platt, meanwhile, said there is a feeling that any labor talks could be
difficult with copper still at historically high prices.
"The workers see the copper price going sharply higher and are not really
getting much in the way of return in terms of their own underlying wages," he
said. "As a result, I think there is a growing radicalism taking place which is
generally forcing a harder stance to get wage concessions."
Meanwhile, he said, mining companies are incurring rising expenses besides
labor, including equipment and certain skills such as geologists. Other
analysts have cited higher energy costs for mining operations.
"They (companies) are trying to get some grip on costs," Platt said. "So they
have shown a hard stance with respect to these wages. The potential is that
these labor problems could become more and more of an issue as the workers
press their demands."
July copper peaked at $3.4895, its strongest level since May 16. It broke
above resistance that traders previously had pegged around the May 22 high of
$3.4375.
Platt put the next resistance for July copper in roughly the $3.50 area, then
$3.68 to $3.70.
The most recent Comex inventory data, released late Friday afternoon, were
down 312 short tons at 27,188 short tons.
Copper settlements (ranges include electronic and pit trading):
July (HGN07) $3.4680; up 6.30c; Range $3.3750-$3.4895
Sept (HGU07) $3.4630; up 6.50c; Range $3.3750-$3.4820
-By Allen Sykora; Dow Jones Newswires; 541-318-8765;
allen.sykora@dowjones.com
(END) Dow Jones Newswires
06-04-07 1350ET
Copyright (c) 2007 Dow Jones & Company, Inc.
DJ info: 82100
N/DJCS,N/DJME,N/OSCM,N/OSFF,N/OSME,N/OSOV,N/OSTR,N/CMD,N/CMM,N/CPE,N/DJWI,N/DRV
N/FCTV,N/MET,N/MKC,N/MKT
FSN2100 CMOT COMMENTS METALS
2007-06-04 17:50:08 UTC
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