Copper Climbs to Three-Week High on Chilean Supply Concerns
2006-08-09 14:33 (New York)
By Katy Watson and Chanyaporn Chanjaroen
Aug. 9 (Bloomberg) -- Copper prices in New York jumped
3 percent to a three-week high on concern global supplies will lag
behind demand as a strike at Chile's Escondida, the world's largest
mine, entered a third day.
Copper prices more than doubled in the past year, partly
triggered by production disruptions. BHP Billiton Ltd., which owns
a controlling stake in Escondida, has failed to reach a wage accord
with workers. Escondida supplied 8.5 percent of the world's copper
last year. BHP said it may stop deliveries to smelters in Asia and
Europe because of the strike.
``The labor disputes are actually keeping prices well bid,''
said Jonathan Barratt, head of foreign exchange and metals at
Tricom Futures Pty. Supplies already are tight, he said.
Copper futures for September delivery jumped 10.8 cents to
$3.71 a pound on the Comex division of the New York Mercantile
Exchange, the highest since July 14. The metal is used in
appliances, and wires and plumbing for houses and cars.
Copper for delivery in three months rose $140, or 1.8 percent,
to $8,030 a metric ton on the London Metal Exchange. Prices are up
83 percent this year.
A futures contract is an obligation to buy or sell a commodity
at a fixed price for a specific delivery date.
Escondida production has tumbled by about 60 percent since the
strike started two days ago, said Mauro Valdes, a spokesman in
Santiago for BHP Billiton. Analysts including Paul Richardson at
Deutsche Bank AG don't expect the strike to disrupt supply for
long.
Setting a Precedent
Previous labor disputes at Chilean mines have been short-
lived. Workers last went on strike at Escondida in August 2003, a
protest that lasted less than a day. Copper prices have more than
tripled since then. Contract employees at state-owned Codelco, the
world's biggest copper producer, returned to work after a 17-day
strike at the El Teniente and Andina mines in January.
The outcome at Escondida will set a precedent for labor
negotiations, analysts say. Codelco, which will negotiate later
this year with unions at its Chuquicamata and Andina mines in
Chile, will also face demands for wage increases, board member
Jorge Candia said on Aug. 7.
``It's an occupational hazard that at some stage, the copper
workers in South America will be on strike,'' said Richard
Lockwood, chief executive officer of London-based New City
Investment Managers. ``At the moment, the best card is held by the
producers.''
The union doesn't plan to hold talks with management today.
``We aren't going to meet with the company until they show a
different willingness'' to reach an accord, the union's spokesman,
Pedro Marin said by telephone from Antofagasta.
BHP Billiton earlier said a meeting had been scheduled.
`Extremely Strong'
The outlook for copper and zinc is ``extremely strong,'' and
production won't catch up with demand until 2007, Boliden AB Chief
Executive Officer Jan Johansson said in an interview. Net income in
the second quarter jumped 10-fold after output gained and metals
prices soared, Stockholm-based Boliden, Scandinavia's only copper
producer, said today.
Copper demand increased 5.7 percent in the first half, and
zinc consumption rose 8 percent, Boliden said.
``Until production is materially increased on a long-term
view, then these metals should remain firm,'' New City's Lockwood
said.
Zinc rose $90, or 2.6 percent, to $3,500 a ton in London.
Prices have surged 83 percent this year.
--With reporting by Sarah Tolkoff in Chicago, Chia-Peck Wong in
Singapore, Tan Hwee Ann in Melbourne, Heather Walsh in Santiago and
Bernard Lo and Paul Gordon in Hong Kong. Editor: McKiernan |
