BASE METALS

Copper's busy September

The red metal fell almost 25% during September but sentiment seems to be picking up of late as politicians try to reach a solution to the debt crisis in Europe and China put out strong manufacturing data

Posted: Monday , 24 Oct 2011

LONDON (Reuters) - 

Copper fell by almost a quarter in September but has steadied on optimism that European leaders may soon strike a deal to solve the debt crisis, while expectations for a continued supply deficit should help underpin prices through to the end of the year.

"Copper price moves in the fourth quarter will depend on what happens on the macro front, they will be volatile and we see them in a $7,000-8,000 range," said a CRU Group copper analyst.

Copper's own fundamentals were still considered supportive.

"We've still got a deficit for the fourth quarter. Stocks aren't building, we've still got bad supply news and consumption doesn't appear to have fallen off a cliff," she added.

In its latest weekly report Barclays Capital said copper "possesses a robust fundamental make-up", citing several factors, including tight supply and healthy momentum in terms of imports by top consumer China.

Supply disruptions are expected to remain an important feature of the market moving into next year, while strikes at two major mines in Indonesia and Peru have yet to be resolved.

But debt worries have not gone away.

"It is encouraging that prices have held the recent lows, but I'm still of the mind that the debt situation is big...Europe is in for more economic hardship, China is slowing and the U.S. will have to tighten its belt," said Will Adams of Fastmarkets.

He expected copper prices to average $6,500 a tonne in 2012.

Benchmark copper was last indicated at $7,365 a tonne.

In early October prices fell to 14-month lows of $6,635 a tonne on fears the escalating euro zone debt crisis would hurt demand for industrial metals.

Below are some of the more significant recent developments in production, stocks and prices that may continue to influence the direction of the market in the remainder of 2011.

PRODUCTION

Sept 30 - Teck Resources (TCKb.TO: Quote) said it had reached a tentative five-year agreement with unionized workers at its Highland Valley copper operation in British Columbia. The company said the union would schedule a ratification vote in the coming days. The terms of the new agreement were not disclosed.

Sept 30 - Workers at Freeport-McMoRan's Cerro Verde mine were to ask Peru's government to unilaterally define a wage deal after talks failed to end a strike at the giant pit, which churns out 2 percent of the global copper supply.

Unionised workers at the mine have been on an indefinite pay strike since Sept. 29. What were thought to be the final government-brokered talks ended without an agreement on Oct. 20. Two workers at the mine said the concentrator plant had halted due to technical failure, but the company said overall output was not much affected.

Sept 29 - Chile produced 427,420 tonnes of the metal in August, down 8.7 percent from the same month last year, the government said.

Sept 29 - Up to 1,500 striking workers at Freeport McMoRan Copper & Gold Inc's giant gold-copper mine in Indonesia's remote Papua province protested outside a government office, urging authorities to help end a dispute over pay. On Oct. 21, Freeport resumed pay talks with its Indonesian mine workers union in a bid to end a month-long strike as gunmen killed three people near the giant facility.

Sept 26 - Romania has decided now is the time to revive the mining of its abundant but neglected gold and copper resources, especially as high metals prices mean it can demand bigger royalty fees and still attract vital Western investment. The minerals drive includes the placing into private hands of 60 percent of Romania's copper reserves.

Sept 26 - Chile's mining sector escaped relatively unscathed from a massive power blackout on Sept. 24, but it will take years for the world's top copper producer to revamp its electrical grid and minimize risks.

Sept 21 - A strike at Iberian Minerals Aguas Tenidas copper-zinc-lead mine in Spain was called off after unions and management resumed talks.

Sept 20 - World refined copper consumption exceeded production by 130,000 tonnes during the first half of this year compared with a deficit of 286,000 tonnes in the first six months of 2010, according to the International Copper Study Group (ICSG). World refined copper output in January to June was 9.621 million tonnes, while consumption totaled 9.751 million tonnes,the ICSG said.

Sept 17 - Congo's state-owned mining company Gecamines could put non-strategic assets on the block to help it fund a $930 million drive to become a major producer, the company said on Saturday, though it does not have plans for a major sell-off.

Sept 16 - China's Chinalco started construction on its $2.2 billion Toromocho Peru mine in May and it should be ready to operate in October 2013, the company said. Chinalco has delayed the project's start date several times, awaiting government permits. The mine is expected to produce about 250,000 tonnes of fine copper a year.

Sept 16 - JX Nippon Mining and Metals Corp said it plans to reach full production at its 160,000 tonnes a year Caserones copper project in Chile in 2014.

Sept 15 - Australian miner Indophil Resources NL said it is not giving up its stake in the Tampakan copper-gold prospect in the Philippines. The company, partly owned by Philippine conglomerate San Miguel Corp , has a 37.5 percent interest in Tampakan, Southeast Asia's largest undeveloped copper-gold prospect. Meanwhile, an official of Sagittarius Mines Inc, which has a stake in Tampakan, said shareholders were committed to the project despite a local ban that puts the mine at risk, and are hopeful the ban will be lifted soon.

Sept 15 - Anglo American's Peru chief said it will start construction on its $3 billion Quellaveco copper mine next year. Quellaveco is expected to produce some 220,000 tonnes of copper per year.

Sept 14 - China produced 3,642,000 tonnes of refined copper in the first eight months of this year, up 16.3 percent from the same period last year, according to the National Bureau of Statistics. Output of mined copper rose by 16.2 percent over the same period to reach 855,000 tonnes.

Sept 9 - Vale is postponing the start-up of the $1.8 billion Salobo copper project in the Amazon region of northern Brazil due to construction problems, the company's chief executive said.

Sept 6 - A construction company building Zambia's Muliashi copper mine, owned by China Nonferrous Metals Co Ltd, said on Tuesday it would sack 1,200 striking workers if they did not return to work immediately.

Sept 2 - Workers at the world's No. 3 copper mine, Chile's Collahuasi, have decided not to stage a threatened 24-hour stoppage after accepting a deal proposed by the mine's operator, a union source said.

STOCKS

LME copper stocks ended September at 474,950 tonnes, up from 464,625 tonnes the previous month.

Despite the overall uptrend, which was not surprising given the seasonally quieter period for demand in the northern hemisphere summer, movements were fairly mixed.

Inventories have been falling since early October though, and on Monday were at their lowest since early April.

Total exchange stocks at the end of September were around 652,000 tonnes, down from about 644,000 tonnes the previous month. They amounted to about 12 days of consumption.

PRICES

Copper prices ended September at $7,018.50 a tonne, down almost 25 percent from $9,275 a tonne at the end of August, with sentiment hit by worries that the euro zone debt crisis would hurt demand.

Weakness continued into early October and by Oct. 3 three-months copper had fallen to 14-month lows of $6,635 a tonne.

Attempts to rebound tended to falter and the lows beckoned again.

But a firmer tone has since been in evidence with optimism on Monday about a solution to the euro zone debt crisis. Promising manufacturing data from top consumer China also boosted investor confidence.

(Compiled by Karen Norton; Editing by Alison Birrane)

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