Copper Leads Metal Gains After Rockslide Cuts Chile Mine Output
2006-07-25 09:31 (New York)
By Katy Watson
July 25 (Bloomberg) -- Copper rose for a second consecutive
day after a rockslide at a mine in Chile cut supply of the metal
used in wiring, while workers at another mine prepared to
strike. Nickel and zinc also gained.
Chile's state-owned Codelco, the world's largest copper
producer, said yesterday that a July 23 rockslide at its largest
mine may reduce output by 1,000 metric tons day. A labor union
at Escondida, also in Chile and the world's biggest copper mine,
yesterday said it will call a strike next month unless owner BHP
Billiton improves a wage offer.
``The two sides are a long, long way apart,'' said Kevin
Norrish, an analyst at Barclays Capital in London. Mine
disruptions are ``a short-term factor on everybody's minds.''
Copper for delivery in three months on the London Metal
Exchange gained $380, or 5.3 percent, to $7,530 a metric ton as
of 2:16 p.m. in London. A close at that price would mark the
biggest percentage gain since July 6.
Copper for delivery in September rose 7.55 cents, or 2.2
percent, to $3.4575 a pound at 9:19 a.m. on the Comex division
of the New York Mercantile Exchange. A futures contract is an
obligation to buy or sell a commodity at a fixed price for a
specific delivery date.
Labor Strife
The metal has gained 70 percent in London this year amid
strikes in Mexico and reduced supplies from mines in Zambia and
Indonesia. Workers at Cananea, Mexico's biggest copper mine,
returned to work last week after going on strike on June 1. A
strike is continuing at La Caridad, Grupo Mexico's second-
biggest mine.
Freeport-McMoRan Copper & Gold Inc. said July 18 that
production at Grasberg in Indonesia, the world's second-largest
copper mine, declined 22 percent in the second quarter because
ore contained less metal.
Codelco will use stockpiles to meet sales contracts
following the rockslide at Chuquicamata in northern Chile. The
company in May forecast 2006 production of 1.7 million tons from
its five fully owned mines.
The union at Escondida expects to vote July 28 to halt
output from Aug. 7, Pedro Marin, a spokesman for Escondida's
Workers' Union No. 1, said yesterday after management and the
union failed to reach a deal. Workers at Escondida are seeking a
raise of 13 percentage points above inflation. Management
yesterday held its offer at 1.5 points above inflation.
Melbourne-based BHP Billiton owns 57.5 percent of
Escondida, Rio Tinto Group owns 30 percent and a group led by
Mitsubishi Corp. owns 10 percent. International Finance Corp.
owns the rest.
Demand Exceeds Supply
Global demand will exceed production this year by 184,000
tons, Credit Suisse said last month in a report. The shortfall
may be filled by inventory. Stockpiles monitored by the LME fell
1 percent to 96,300 tons, the exchange said today. That's equal
to less than three days of global consumption.
``With the copper market already tight and with LME stocks
below 100,000 metric tons, there is not much of a cushion to
protect the market from any disruption, let alone a disruption
and a strike,'' said William Adams, a Saffron Walden, England-
based analyst at metals information company Basemetals.com.
Demand in China will also underpin copper prices, according
to Norrish, of Barclays Capital. Chinese imports in June fell 51
percent to 69,720 metric tons, according to the Beijing-based
Customs General Administration. That decline was due to Chinese
consumers using stockpiled metal. There's a ``big risk of a
significant upturn'' in demand from China later this year, said
Norrish.
Other Metals
Also on the LME, nickel gained $925 to $24,950 a ton, lead
was $25 higher at $1,075 and aluminum advanced $30 to $2,530.
Tin rose $325 to $8,300.
Zinc gained $125, or 4 percent, to $3,245, taking its gain
so far this year to 70 percent. The metal will remain at
``historically high levels'' for the next 12 months, according
to Greig Gailey, chief executive officer of Zinifex Ltd., in an
interview from Melbourne. Zinifex is the world's second-largest
zinc producer.
``The issue with zinc at the moment is that there is simply
not enough concentrate, i.e. raw material, available to feed the
world's smelters,'' said Gailey. ``Given the lead time
associated with bringing major mining projects to market we
don't see any change in that situation in the short to medium
term.''
--With reporting by Catherine Yang in Hong Kong and Heather
Walsh in Santiago. Editor: Casey (slw/dje) |
