Analysis

The Times May 29, 2006

Base metals demand rational thinking Anatole Kaletsky

WHO would have imagined at the beginning of this decade, when the internet mania was still in full swing, that by the second half of the decade most of the stories dominating business headlines would not be about nano-electronics or quantum-computing, but about global consolidation in such quintessentially old-economy businesses as steel, copper and oil? Or that most of the new entrants into the global billionaires league in the early years of the 21st century would not be technology entrepreneurs or software designers, but Indian ironmasters, Texan oil speculators and Russian commodity oligarchs?

But what will happen to the small investors, pension funds and charity endowments who have decided to make their fortunes by buying up copper, steel, oil and other commodity assets, belatedly inspired by the sensational riches accumulated by the likes of Roman Abramovich, T. Boone Pickens and Lakshmi Mital? The chances are that these recent passengers on the commodity bandwagon will do no better than the tardy followers of Bill Gates, Michael Dell and Chris Gent.

The fact is that commodity prices many of which have risen fourfold since 2003 and have doubled during this year alone are rising on several false assumptions. The first is that the world economy will continue to grow very rapidly, as it has done since 2003. The second is that rapid global growth will cause demand for commodities to outstrip supply. The third is that even if demand growth did slow, commodity prices would be supported by the geopolitical and inflation risks created by President Bushs confrontation with Iran.

I have written in previous columns about my reasons for believing that the world economy would suffer what I call a mid-cycle slowdown, though probably not outright recession, in the year ahead, so let me concentrate on the other two arguments. The idea that even 5 per cent global growth would deplete global supplies of base metals such as iron ore, zinc or copper completely contradicts the experience of the past 50 years, which shows that the world economy can grow rapidly for decades while commodity prices have declined steadily in relation to other goods and services (see charts). Of course, this downward trend could not continue forever and a gradual recovery in commodity prices made good sense from the start of this decade onwards. But to rationalise the price explosion of the past 12 months would require a very dramatic change in supply and demand prospects and there has been nothing of the kind.

For example, the International Copper Study Group last week published global demand and supply estimates, suggesting that the copper market would end 2006 with a modest supply surplus, after an essentially balanced market at the end of 2005. Given that this balanced market triggered an unprecedented 150 per cent four-month price increase, some other forces must have been at play and the nature of these forces is fairly clear. Financial investors have been buying up oil, gold, copper and other commodities with little or no regard to the underlying supply-and-demand relationships, in a feeding frenzy very reminiscent of the 1990s technology boom.

In the case of oil and gold, there are at least some rational grounds for such speculation. Even if liquidity is drained from the global economy, if interest rates rise further than expected and if growth begins to slow around the world, oil and gold could easily remain in a powerful bull market for reasons that have nothing to do with the economic outlook. Oil and gold prices now incorporate a significant risk premium, reflecting the serious possibility of major supply disruptions connected with geopolitics. Suppose that America or Israel decided to bomb Iran. Without trying to speculate about the full geopolitical implications for example, whether such an event would deter or encourage Irans nuclear programme we can focus on one simple and predictable consequence of an attack on Iran. Iran would probably retaliate by closing the Straits of Hormuz, the shipping channel that carries 40 per cent of the worlds oil exports. In consequence, the price of oil would presumably shoot up to $100 or even $150. Gold would quite rationally jump in sympathy maybe to $800 an ounce or even $1,000 since the world economy would face a risk of stagflation and geopolitical conflict greater than at any time since the Yom Kippur War of 1973.

But how would copper, zinc and other industrial commodities respond? To judge by the behaviour of the markets, base metal prices would be expected to rise in parallel with oil and gold maybe even more steeply. That, after all, is what has been happening since early 2005. Whenever oil has risen in response to some new geopolitical threat or potential supply shock, the gold price has moved in tandem and other commodities have also jumped. But does this make sense?

A war or embargo in the Middle East or a revolution in Nigeria or Venezuela would certainly cut oil supplies and therefore boost the oil price, but such geopolitical upheavals would do no damage at all to the supply of copper or zinc. It would take revolutions in countries such as Chile, Australia and Russia to interrupt base metal supply. And even if such revolutions did happen, they would have only a marginal impact on global copper or zinc supplies because these minerals are much more evenly distributed around the world than oil. Yet while political upheavals in the Middle East would have no effect on global supply of base metals, they would have a very big effect on demand. Another oil shock would devastate industrial production and therefore commodity demand.

With industrial demand dropping, while commodity production remained unaffected, the market price of copper, zinc and other base metals would collapse. If the Straits of Hormuz were closed tomorrow, the price of oil would probably soar from $70 to $150 and gold might jump from $650 to $1,000 but the price of copper would plunge from $8,000 to $4,000 a tonne.

Todays unpredictable geopolitics may justify a supply-risk premium for oil and gold. Base metals, by contrast, should suffer a discount for demand-risk and they will when investors start to think more rationally about commodities and global shocks.

Don't bet the farm on the mine. Commodity stocks like copper are through the roof -- but don't count on them staying there.

FORTUNE Magazine By Nelson D. Schwartz, FORTUNE Europe editor
May 26, 2006: 6:51 AM EDT

LONDON (FORTUNE) - Like the teenagers who favored Benetton shirts and Jams shorts in the 1980s, individual investors can fall for fads whose appeal seems scarcely understandable after the fact.

I'm not just talking about obvious examples like Pets.com, I'm referring to whole classes of investments - remember when ads on the radio said you just had to be in CMOs (collateralized mortgage obligations) or emerging markets or telcos? I do - and I remember the pain when those bets came a cropper.

Right now, there's a fierce debate going on in the markets over commodities, which have enjoyed an incredible run-up this year.

Proponents say we're just in the early stages of a long-boom driven by China and other newly industrializing countries that will mean high demand for copper and other basic commodities for years to come. Bears, who've watched commodities pull back sharply in recent weeks, argue that we've finally peaked and more pain is on the way.

What no one disagrees about is the power of the nearly vertical rally in base metals - copper, zinc, nickel, aluminum, lead - and in the shares of the companies that extract them from the ground. Since the beginning of this year, copper has gone from $4,400 per ton to $8,075. Zinc has done even better, rising from $1,910 to $3,537, according to Barclays metals analyst Ingrid Sternby.

"Fundamentals and speculative factors have gone hand in hand," says Sternby. "If the fundamentals weren't supportive, we wouldn't have seen higher prices."

Maybe so. In any case, I'm not going to make a call on commodities - if I were that good, I'd be sitting on my own island in the Caribbean and not writing this column. But what I will say is that individual investors should proceed with extreme caution, both in terms of investing in commodities themselves and in buying newly popular metals plays like Phelps Dodge (Research), Freeport-McMoran (Research), Southern Copper (Research), BHP Billiton (Research), and Rio Tinto (Research).

This doesn't mean they'll go down - heck, they might keep heading straight up - but it won't be a smooth ride in either direction.

Copper looks especially vulnerable. Along with wiring and other industrial uses in places like China, copper also goes into new home construction in the United States. If the U.S. homebuilding market slows (not unlikely in view of higher rates) or economic growth drops from its currently blistering 5.3 percent rate, copper demand could certainly ease.

That would hit shares of Phelps Dodge hard. A smarter, more diversified play for cautious investors is Australia's BHP Billiton. As London-based metals hedge fund manager Keiron Mathias notes, BHP is strong in iron ore and coal as well as hot base metals like zinc and copper, while shares of Phelps Dodge are much more correlated to volatile copper prices.

The last time around we had a fad like this, individual investors who got burned on Internet stocks claimed they were misled by the Henry Blodgets and Mary Meekers of the world. And many strategists and analysts remain bullish on metals now. They argue that even if prices decline a bit more, high-quality companies like Phelps Dodge will continue to make big money. That's true - but that doesn't mean even higher metals prices aren't already priced into the stocks.

If you don't believe me, check out the drop in oil-related shares recently. Energy companies are still on track for multi-billion dollar profits this quarter, gasoline is still at $3 a gallon, but the modest pullback in oil prices has pulled shares of even the best-managed companies like Exxon Mobil and BP lower.

So if copper comes a cropper, don't say you weren't warned.

Daily Telegraph (Filed: 29/05/2006) Ambrose Evans-Pritchard

Ignore the world's biggest central banks at your peril


Round one to the Bank of Japan, ultimate cause of the violent sell-off in stocks, commodities, and riskier bonds across the world over the past three weeks.

Governor Toshihiko Fukui has bled more than $140bn (75.3bn) from his banking system since March 9 to reduce a menacing overhang of liquidity left from the battle against deflation. He is halfway through.

No longer buying fistfuls of US Treasuries with printed money to hold down the yen, the Bank of Japan has been the silent force pushing up global bond yields this year by 0.8pc - the jump that really lies behind the market rout.

Or rather, it has stopped holding yields down to the lowest levels in a century. Japanese holdings of US Treasuries have fallen by $74.5bn since December. "We are reaching an inflection point in monetary policy," said Mr Fukui.

Inflection to some, bloodbath to others. The first casualties began to emerge on the fringes of the "yen carry trade" earlier this spring.

Hedge funds that had borrowed for zilch in Tokyo, to lend for a fat premium to overheating Iceland and New Zealand, began rushing for narrow exits.

The storm has since swept up much of the globe, setting off the steepest falls in emerging market stocks and bonds since the Russian default in 1998.

"Most people underestimated the effects of monetary tightening in Japan," said Phillip Poole, an economist at HSBC. "The liquidity that has driven these markets is being withdrawn."

The next Japanese spanner in the works will be the end of zero interest rates, or zirp as it is known. Bank-watchers have pencilled in July or September for the moment of reckoning.

Few investors lose sleep worrying about life after zirp, but our guardians at the Bank of International Settlements view it as the greatest imminent risk to global markets.

The Japanese have built up net foreign assets worth $2,500bn, investing abroad what they refused to spend at home during their 15-year slump.

Now they are buying again. Tokyo and Osaka land prices are ticking up smartly after falling 57pc since 1990. The IMF forecasts 2.75pc growth this year

"We are all going to have to look over our shoulder when Japan raises rates because nobody knows what is going to happen when all this money goes back home," said a BIS official.

Even so, round two may yet go to the European Central Bank on June 8 as Frankfurt's hawks lose patience with exploding M3 money growth, and a housing bubble threatening the viability of monetary union itself.

Housing loans (ex Germany) grew 19.4pc in the year to March, on top of the 17pc surge the year before. Spain is a disaster waiting to happen. In Portugal it has already happened.

Judging by the apocalyptic tone of the Bundesbank's May report, Europe is on the brink of a monetary shock going far beyond the mincing half-measures trickled out until now by Jean-Claude Trichet, ECB chief and French "soft euro" inflationist.

"There are immediate inflationary risks emerging," said the bank, citing monetary growth of 10.5pc as a "serious warning sign" that policy was too lax. The eurozone's HCIP inflation is now 2.5pc.

Mr Trichet - and his Club Med allies - can ignore the Bundesbank, as he did earlier this spring, reneging on a quarter-point May rate rise (to 2.75pc) already signalled to the markets.

But that way lies perdition, for the ECB has no more credibility than the Banca d'Italia without Buba's reflected glory.

On the warpath, the Teutonic-bloc is now trying to shame Mr Trichet's doves into doing their monetary duty. "There is no dispute that a further tightening of monetary policy is needed," said Austrian governor, Klaus Liebscher.

We have been warned. The ECB is about to bare its fangs for the first time since EMU. Germany is back, and a reawakened Buba is snorting with the same bloody-minded determination it displayed before causing the 1987 crash and the 1992 bust up of the ERM.

Yet round three must surely go to the US Federal Reserve with a 17th consecutive rate rise to 5.25pc - if we get that far.

Ben Bernanke was back-peddling fast in a letter to Congress last week, pleading that core CPI inflation "overstates" price rises. "Monetary policy must be forward-looking," he said.

Has the Fed already gone too far, baking a recession into the pie? Will the delayed effects of past tightening kick in, with mounting ferocity, just as the housing boom plummets into bust?

"Housing mayhem seems unavoidable. The US hard landing begins now," said Charles Dumas, global strategist at Lombard Street Research.

Mortgage applications are down 17pc in a year. House sales are down 5.7pc, and inventories of unsold new houses are at their highest since 1996. The central prop holding up the US consumer boom is crumbling, leaving behind record household debts equal to 127pc of disposable income.

"As the hard landing/recession arrives, it is the Asian exporters, the commodity markets and currencies, and especially the base metals that are likely to crash over the next year. The game is up for assets that have gone way too high on the basis of cheap funding and optimistic delusions," said Mr Dumas.

Teun Draaisma, Morgan Stanley's chief European equity strategist, had a warning for bargain hunters, even after the 8pc fall in European stocks and 15pc fall in the MSCI emerging markets index. "Do not be tempted to buy. The first violent part of this correction took nine trading days: the second part may well take several months," he said.

The world has enjoyed a magnificent boom for 24 years, punctuated only by light downturns along the way. The cycle has been kept alive beyond its natural life by ever-laxer monetary policy, feeding ever bigger asset bubbles and encouraging ever-higher levels of debt.

Central banks can draw down prosperity from the future for a while. In the end - now? - the future arrives.

Market watcher believes prices near cyclical peaks: Natexis

Source: Mining Weekly 26 May 2006


London-based commodity specialist Natexis Commodity Markets believes that further upside price potential is limited for most base metals, despite the persistently low level of inventories globally.

The company writes in its May report that it has a somewhat cautious attitude towards the booming sector, and believes that prices are at, or close to, cyclical peaks.

With regard to aluminium, Natexis states that new cycle highs are possible for this commodity. The supply side of the aluminium market is not encouraging, though, notes the report.

According to the latest data from the International Aluminium Institute, production (excluding China) increased by 4,6% year-on-year in the January to February period.

If the sharply higher production in China is taken into consideration, global output has increased by 7,7% so far this year.

Higher production in China is maintaining the country's position as a net exporter of aluminium a trend Natexis expects to continue.

"The much-vaunted curbs to primary aluminium output have yet to emerge, while there are significant increases to aluminium in the pipeline.

"Although prices may go higher in the short term, we believe that prices are close to the peak.

"We are projecting an average annual price of $2 600/t for 2006, followed by $2 200/t in 2007." As for copper, Natexis reports that the combination of fund activity and supply disruptions against a background of low inventories has pushed prices to levels that were unthinkable just a few weeks ago. The commodity specialist states that high copper prices will accelerate the substitution pressures that are already curbing demand in some applications. It is also apparently leading to a reduction in Chinese imports. In the first three months of this year, Chinese imports of copper cathode registered a 37% decline.

As a consequence, Natexis Commodity Markets has scaled back its consumption projections and, despite the recent production losses, projects a surplus in 2006 and 2007.

"Given that price levels in April are massively above the marginal cost of production, we believe that it will only take a modest increase in inventories to trigger a significant decline in prices.

"We are projecting an average annual price of $5 000/t for 2006, followed by $3 750/t next year." Natexis notes that lead has underperformed the rest of the base-metals sector in recent months as inventories climbed, with the expectation that they will trend even higher.

Once it becomes clear that the extreme tightness is behind the market, the commodity specialist expects even further price declines. "We forecast an average annual price decline to $1 100/t in 2006, followed by $900/t in 2007." As for nickel, Natexis reports that the price recently increased to a new cycle high of above $20 000/t as demand from the stainless steel sector has improved.

"High nickel prices have prompted a shift towards grades of stainless steel which contain lower amounts of nickel, such as the 200 series or ferritic grades that contain no nickel.

"The recent surge in nickel prices will soon begin to have an impact on the stainless steel market through higher alloy surcharges. "We believe that this will affect both stainless steel production and nickel consumption later in this year. "Natexis expects a correction in prices from mid-April highs, and forecasts that the average annual price will be $15 000/t from 2006. The prospect of higher production towards the end of 2007 should see prices retreat to an average of $12 000/t.

The company also reports that the tin market will be in modest surplus for 2006 and 2007.

"Once some of the speculative buying activity has abated, we expect prices to retreat.

"From a historical standpoint prices should remain at elevated levels and we project an annual average of $8 000/t for 2006, followed by $7 500/t next year." With regard to zinc, Natexis reports that many of the aspects that are currently supporting the price will remain relevant for some time.

It projects an annual average of $2 600/t for 2006, followed by $1 800/t in 2007.

Thanks. Sobering but very interesting articles. Rather than metals I believe the best value are medium cap oil shares with a North Sea production base which funds overseas exploration.These companies can expand rapidly without incurring large liabilities on the balance sheet.

Apart from unpredictable geopolitics justifying a supply-risk premium for oil it will be differcult to alter a mindset that requires a five litre wagon to take the kids to school.

Source: Dow Jones 2 June 2006

Copper fabricators seek alternatives after rally


European copper fabricators are putting a renewed emphasis on research and development to come up with new products that either reduce the use of copper or replace it altogether, industry participants said Tuesday.

Copper prices have more than doubled on the London Metal Exchange since the start of the year, prompting the move away from the metal in products used in a variety of industries including plumbing and electrical transmission.

Fabricators are turning instead to commodities such as aluminium and plastics, and work is even underway to try to eliminate copper's natural advantage in conducting heat and electricity.

That R&D has already led to a variety of new products.

One example is the emergence of a new innovation for the plumbing sector using copper in panel heating systems, cooling panels and radiator connections.

Known as Q-Tec copper tube and developed by German copper fabricator KM Europa Metal AG, the product is far easier to install and costs a lot less because its thinner walls, which are covered in protective plastic, require much less copper than traditional tube.

And KME has also developed TECU, a product used in roofs and facades that is 40% to 50% thinner than its traditional, copper-based counterpart.

It's already been used for buildings such as the Israeli embassy in Berlin, the Hamburg city warehouse in Germany, the De Young museum in San Francisco and the harbor control tower in Lisbon.

"Whether or not copper products are substituted depends on the individual products and length of the supply chain," said Simon Payton, secretary-general of the International Wrought Copper Council. "Plumbing tube, for instance, has a short supply chain, from a building merchant to a plumber, so there's far less room for a price increase to be absorbed."

According to Bob Oakley, a consultant for the Institute of Plumbing & Heating Engineering, copper's "very expensive" installation cost means it is being increasingly replaced by plastics in this sector.

"There have been a number of new plumbing developments using plastic, such as pipe flooring and hot- and cold-water cylinders, although these are also using stainless steel," he said.

"Plumbers quote for jobs and then several months later when they go to buy the materials, they find that copper prices have doubled. And if they have a contract with a client for a fixed price, then they are forced to either accept it or breach the contract. It's a very serious situation," he added.
Copper still vital

Yet Oakley thinks there's still no ideal replacement for copper. "Plastic is not the answer copper is still the best available option for plumbing. If it was my house, I'd have copper. But the high copper price is hitting everybody," he said.

"Carbon steel is sometimes used as an alternative to copper but it can leak. And while developers are using plastic, it is not as durable and can damage during installation. Some manufacturers have changed their designs three times because plastics aren't effective," he added.

Frank Jones, director of the Plastic Pipes Group, the U.K. trade association representing manufacturers and material suppliers of plastics piping systems, begged to differ.

"There's been a steep increase in plastic used in hot- and cold-water central heating. Higher volumes are related to new house starts and are gaining continuously due to the benefits such as cost advantage," Jones said. "We're benefiting from consistent growth in the use of plastics as an alternative to copper, and we expect this to continue," he added.

Winchmore Hill Plumbing, a London-based building merchant, said speed-fit plastic has barely risen in price over the last six months, while the equivalent in copper has more than doubled. So plumbers who are often shocked at how fast prices are rising have started to buy plastic instead.

Independent metals consultant Simon Hunt said the situation with copper is similar to that seen in the mid-1960s, when substitution studies for Western Europe show that the region lost 18% of its copper markets to alternative materials such as aluminium.

"I estimate it will lose this again, slowly, over a five-year or more period. The sector needs to retool, and consider its options with research and development," Hunt said.

Copper is even losing out in industries in which it was long considered irreplaceable. Johnson Controls' (JCI) air-conditioner manufacturer York, for example, has started to market an all-aluminium unit.

"This could be very serious for copper, with that industry consuming over one million tons a year," said Hunt. "The risk is that Chinese air conditioning makers are looking at similar alternatives," he added.

And now that high-electrical voltage transformers are being made from aluminium instead of copper, industry participants believe it's only a matter of time before a similar scenario is seen in the full range of transformers.

"Aluminium is much more end-use driven and manufacturers view current copper prices as a generational opportunity to increase their market share," Hunt added.

London Metal Exchange copper traded at a contract high of $8,825/ton on May 11 and traded around $8,400/ton Tuesday. This is up from around $4,000/ton at the start of 2006.

I don't think we've seen the end of the metals boom just yet, OK plastics are cheaper but designs and fashions favour natural products at the moment. Also lets not forget that metals are high in demand especially within technology which plastics being an awfull conductor can not compete against.

BHP Billiton, the worlds biggest mining group, has postponed the A$900 million (360 million) expansion of its Worsley alumina refinery in Western Australia, citing soaring labour and material costs.

biased thread,put arguments up for bulls,theres plenty around.

like???

due to the low prices for many base metals in th 1980's and 1990s there was a severe lack of new mines being commissioned during the period. This has resulted in the surge in, for example, the copper price over the last few months.

The increase in the copper price will make it attractive for new mines to be commissioned where it was previously uneconomical. However production will still be a few years away.

Therefore the current demand, especially from China and India, should ensure that the price remains historically high as current production is unlikely to satisfy demand for the forseeable future.

On this basis I am still of the opinion that the likes of Kazakhmys and Antofagasta represent extremely good value (even compared to the diversified giants such as Billiton and RTZ).

Both are awash with cash with Antofagasta giving special dividends and Kazakhmys looking for suitable acquisitions.

All IMHO of course !!!!

Ian

7 June 2006
Southern Copper: Output may fall substantially on strikes

Source: Dow Jones


Copper Concentrate Catalog

Southern Copper Corp. (PCU) Chief Executive Oscar Gonzalez Rocha said Tuesday that copper production could fall substantially this year due to strikes at its Mexican mines at La Caridad and Cananea.

Workers at La Caridad, Mexico's second-largest copper mine, have been on strike since March 24. Disputes have more recently led to work stoppages at the Cananea site, which is Mexico's largest copper mine.

Gonzalez Rocha said the company has "no idea how long the strikes could last."

"Production at Southern in Peru and Mexico is some 700,000 metric tons, and with these strikes it could drop substantially, depending on how long they last," he said, adding that the losses over three months could be some 80,000 tons.

The company has said it hopes to make up some of the shortfall with production at its Peruvian units.

Gonzalez Rocha also confirmed that the company will make an offer on Wednesday for the Toromocho copper project in southern Peru, owned by Peru Copper Inc..

"They should receive from an investment bank an offer from Southern tomorrow, as the deadline is midday," he said, calling it an "important" project.

The company had said earlier it could present an offer for the Toromocho project, located 142 kilometres east of Lima in the central Andes.

On March 6, Peru Copper said the Toromocho project has 1.26 billion metric tons of proven and probable reserves at an average copper equivalent of 0.68%.

Southern Copper has also started talks with several other major mining companies about a possible merger or other sort of joint venture or sale. The company had earlier named Phelps Dodge Corp., Xstrata PLC, Rio Tinto PLC, and Anglo American PLC as companies of interest.

Gonzalez Rocha said that the number of interested companies had narrowed.

"We still haven't visited the companies," he added.

Southern Copper operates mines, smelting and refining capacities in Mexico and Peru.

7 June 2006 Copper rebounds on hedge fund driven trade: LME

Source: Dow Jones


London Metal Exchange three-month copper rebounded in illiquid, hedge fund-driven trade to end the afternoon session higher on the day, after coming precariously close to a critical move below key technical support, traders said.

LME copper had earlier teetered around $7,245 a metric ton, the recent May 22 low, but support held. After an illiquid afternoon session, LME copper resumed its rise and hit an intraday high of $7,825/ton before closing the kerb session at $7,780/ton.

This is up 8% on the day's lows but still down 12% on the all-time high of $8,825/ton, hit May 11.

Traders attributed the rebound to covering from one or two large U.S. hedge funds whose bearish stance had led them to go short in anticipation of much lower prices.

"The lows haven't materialized so these players are having to come back in as buyers to cover positions in the short term," a trader added.

Another U.S.-based hedge fund that is active in copper and holds a generally bullish view of the market in the long-term was also said to be buying the metal during the kerb.



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DJ Comex Copper Review:Trimmed Losses, Reversed To End Higher

NEW YORK (Dow Jones)--Comex copper futures trimmed their losses on the day to
settle higher Wednesday at the New York Mercantile Exchange as buyers emerged
at the lows, trader sources reported.

The benchmark July copper contract settled 9.45 cents higher at $3.5840 per
pound. At the open the contract ignored bullish fundamental news and dropped to
a session low of $3.3550 per pound.

Traders at Triland Metals noted that copper traded lower despite news that
producer Grupo Mexico SA (GMEXICO.MX) declared force majeure on June and July
copper deliveries as a strike at its Cananea copper mine entered its sixth day.

"The strong dollar and weakness in the precious metal and falling stock
markets were the main influence," the traders said referring to copper's drop
in price.

Amid that news, speculative liquidation and short selling ran copper to its
lows of the day before trade buying appeared.

Scott Meyers of Pioneer Futures said he remains bullish on metals despite its
recent corrective patterns.

"Copper is trending back up and these pauses seem to refresh the market,"
said Meyers.

Other traders noted that New York copper rebounded as the London market also
moved off its lows in illiquid, hedge fund-driven trade.

Strong demand to keep copper prices high Thursday Jun 8 19:49 AEST


Strong demand from China and supply bottlenecks could keep copper prices high for a number of years, a top Rio Tinto executive said.

"We see a robust outlook from the demand side," Tom Albanese, Rio Tinto's chief executive for copper and exploration, told reporters at a conference.

"And it will take, probably, a number of years before we see some of these constraints from the supply side beginning to be taken out of the system."

There is a shortage in everything from equipment to engineers to ballbearings, which combined with stricter environmental regulations worldwide is slowing the development of new mines and keeping prices high, Albanese said.

Grupo Mexico Warns of Closing Copper Mine



MEXICO CITY, Jun 08, 2006 (AP Online via COMTEX) -- Mexican mining giant Grupo Mexico announced Thursday that it will be forced to close one of the country's largest copper mines if workers continue striking.

Grupo Mexico issued a news release stating the company would "be forced to close the mine and concentrator" at La Caridad copper complex in northern Sonora state if strikes continue at La Caridad mine and the nearby Cananea mine.

Workers at Cananea, Mexico's biggest copper mine, walked off the job June 2, saying the company had refused to give half of the workers the day off to celebrate the 100th anniversary of a historic 1906 strike at the mine when it was owned by a U.S. company.

The strike at the Cananea mine added to the supply problems already caused when workers at La Caridad, the country's second largest copper mine, went on strike March 24, demanding government support in their ongoing dispute with the mining union's leadership.

Mining workers across Mexico have demanded government recognition of Napoleon Gomez Urrutia as the leader of the miners union, but the government has instead maintained that dissident Elias Morales is the new leader of the union, despite a number of union meetings in which Urrutia was ratified.

Gomez Urrutia is accused of misappropriating $55 million in funds paid into a trust by Grupo Mexico in relation to the 1990 privatization of La Caridad and Cananea, and a judge in Sonora last week issued a warrant for his arrest on fraud charges. He was in Canada last week.

The growing dispute has already escalated into strikes at a number of key mining and steel operations.

Grupo Mexico has said that Mexican copper production in 2006 could drop as a result of the prolonged strike at La Caridad, after the company earlier in the year forecast production to rise.

La Caridad produces about 150,000 metric tons of copper concentrate a year and 250,000 tons of different refined copper products. Cananea produces about 140,000 tons of copper concentrate and 50,000 tons of refined copper.

Branding the ongoing strikes as "illegal activities," Grupo Mexico said that not only the Caridad mining complex, but also the Cananea mine would be closed if a lasting solution wasn't reached promptly.

Daily Telegraph June 9

Workers at Anglo American's Kumba Resources unit, the world's fourth-largest iron ore producer, declared a dispute with the company after pay talks failed, clearing the way for a strike, a union said.

Copper Futures in Shanghai Tumble as Rate Rises Spur Fears of Lower Demand

June 9 (Bloomberg) -- Copper futures in Shanghai declined after central banks in Asia and Europe raised interest rates to curb inflation, threatening to slow economic growth and demand for commodities. Aluminum also dropped.

The European Central Bank, the Reserve Bank of India, the Bank of Korea and the Reserve Bank of South Africa increased benchmark rates yesterday, sending copper down in London and New York. The slump may signal the end of a five-year commodity rally fuelled by demand from China and increased investment by hedge and pension funds.

``The rate increases will slow down economic growth,'' said Li Rong, copper analyst at Great Wall Futures Co., by phone from Shanghai today. ``Copper has been declining from records since mid-May on expectations of such rate increases.''

Copper for delivery in August fell 2,730 yuan, or 3.9 percent, to 66,620 yuan ($8,316) a ton on the Shanghai Futures Exchange at the 3:00 p.m. close. The metal, which earlier dropped by the daily limit of 4 percent, has slumped 22 percent since it reached a record on May 15. It fell 4 percent this week.

``Investors are selling commodities to avert risks,'' said Shen Haihua, vice president of Maike Futures Co.

Slower growth prospects may prompt investment funds to reduce stakes in commodities. Pension and hedge funds had helped to fuel the rally in copper and other metals as they sought better returns than stocks and bonds.

Higher Risks

``The risks are higher for funds to continue to invest in commodities,'' said Maike's Shen, who believes the U.S. dollar is a better investment than commodities.

Copper for delivery in three months on the London Metal Exchange rose $65, or 0.9 percent, to $7,375 a ton at 3:29 p.m. Shanghai time. It closed 6.2 percent lower at $7,310 yesterday.

Commodities: Gold keeps sliding

Fri 09 Jun 2006
LONDON (SHARECAST) -

There were further losses on the gold market, with a stronger dollar continuing to erode the yellow metals bumper gains built up earlier this year.

Thursdays losses take golds slide to $120 from the 26-year high seen at $730 on 12 May as it loses its attraction as a hedge against a weak US currency.

Traders are now bracing themselves for a possible move below $600, which they say could spark off a round of technical selling sending prices south towards $540.

Meanwhile silver tumbled to a 10 week low at $11.18 an ounce, while July platinum was more than $41 adrift at $1,190.10 an ounce. Copper for July delivery was 22.7 cents worse at $3.3570 a pound.

Copper Heads for 2nd Weekly Drop on Concern Rate Increases Will Curb Usage

June 9 (Bloomberg) -- Copper headed for a second consecutive weekly decline in London after central banks in Europe and Asia raised borrowing costs, fueling speculation that demand for the metal used in wiring may be curbed.

The European Central Bank yesterday lifted its benchmark interest rate for the third time since December. South Korea's central bank and the Reserve Bank of India were among banks that also increased rates. Copper yesterday tumbled the most in a week on the London Metal Exchange, and shares of mining companies also slumped.

``Speculators have had a bad week,'' said Kevin Tuohy, a trader in London at Man Financial Ltd., one of the 11 companies trading on the floor of the LME. ``Everyone wants a little bit of rest.''

Copper for delivery in three months on the LME fell $85, or 1.2 percent, to $7,225 a metric on as of 10:13 a.m. local time. A close at that level would represent a weekly drop of 8.2 percent. The metal dropped 4.4 percent last week.

Investors are betting that higher efforts by central banks to control inflation may bring to and end a three-year rally in commodity prices. In that period copper has risen more than threefold, and traded on May 11 at a record $8,800.

``Interest rates are weighing on all the metals,'' said Paul McLeod, vice president of precious metals at Commerzbank Securities in New York. ``The increased real rate of returns is going to be detrimental to all hard assets.''

If copper closes below $7,245 a ton, traders who use so- called technical charts may sell more metal next week, Tuohy said.

Aluminum lost $1 to $2,501 a ton and nickel declined $550 or 2.7 percent, to $19,275 a ton. Lead dropped $2 to $1,007. Tin gained $100, or 1.3 percent, to $8,000 and zinc rose $50 to $3,350 a ton.

Iran could change everything, $100 + oil, Gold price will rocket and with gold & silver being a bye product of copper mining so will copper followed by Zinc.

Pop Go Commodities By Richard Suttmeier RealMoney.com 6/8/2006


Commodities snapped after the FOMC raised the fed funds rate to 5% on May 10, with speculators around the world fearing further rate hikes. The bubbles have popped for gold, copper and steel, and the share prices for metals miners have been hit even harder than the commodities themselves.

This illustrates the risk I have discussed in my columns covering miners and steel makers, as this sector has been the most overvalued among the 11 I follow. You may have left some money on the table if you followed my suggestions to sell, but now we see how hard it is to follow the crowd out the door on that painful right side of a parabolic peak, as stocks become falling knives.

Comex gold reached a high of $732 on May 12, just two days after the FOMC hiked the funds rate. Wednesday it hit a low of $621.30; a close Friday below the five-week modified moving average of $644.20 will shift the weekly chart profile to negative, indicating risk to my semiannual support at $551. If it somehow rallies to end the week above $644, the rebound should be limited to my monthly resistance level of $676.60.

Nymex crude has been moving sideways to down since reaching $75.35 on April 21; a close Friday below the five-week MMA of $70.28 would shift the weekly chart profile to negative, indicating risk to my semiannual support of $64.58.

The Federal Reserve is concerned about energy-induced inflationary pressures. If crude oil is trading toward this support, the FOMC should make a last-minute decision to pause at its June 28-29 meeting. This would stabilize commodities and steel and mining stocks.

Valuations among miners and steel makers have fallen sharply since I last wrote about them May 5, but the sector is still the most overvalued at 8.8%, with precious-metals miners 21.2% overvalued, base-metals miners 7.2% overvalued and steel makers 30.2% overvalued.

Monday will be interesting. Shares were well up yesterday in response to early Wall Street developments but after London closed Wall Street nose-dived. So did metals. Copper crashed more than 5% and this is sure to hammer metals share prices in London on Monday. Be prepared!!!!



"Business The Times June 10, 2006

Rising US import bill adds to jitters on Wall Street


WALL STREET suffered another day of jittery trading yesterday as market nerves over oil-fuelled inflationary pressures and higher interest rates left American blue-chip shares mired in negative territory.

After a turbulent Thursday for US stock markets, in which the Dow Jones industrial average sank more than 1 per cent before rebounding into positive territory, leading American shares surrendered early gains yesterday to sink by as much as 67 points in early afternoon dealing. The Dow went on to close down 46.90 points at 10,891.90. "

The S&P500 index had a loss of 2.8% for the week. The Nasdaq Composite saw a weekly decline of 4% and the Dow Jones Industrial Average fell by 3.3% over the week.

The Nikkei 225 index fell by more than 7%, its steepest one-week fall in four years.

Over the week, however, whilst the FTSE250 fell by 4.5% the FTSE100 only fell by 1.9%. It does appear to be the case therefore that the FTSE100 will be playing catch-up tomorrow and will suffer quite a fall.

Bullion's breather discounted in shares      By: Barry Sergeant      11-JUN-06

JOHANNESBURG (Mineweb.com) -- Fresh analysis of gold markets and stocks is seldom a one-way story. At this juncture, the good news is that gold stocks are now pricing in a $550 to $570 an ounce long-term gold price, according to Stephen D. Walker, director of global mining research at RBC Capital Markets.

The bad news, though not so bad after Walkers comments, is that according to the Bank Credit Analyst, there is more downside for gold prices in the near term. Developing an optimised theme going forward presents investors with a quandary; Walker, for one, argues that gold stocks offer attractive risk reward upside.

Gold bullion prices have fallen by more than 10% in the past month, even, as BCA Research puts it as investor concerns about inflation have escalated. Gold bullion is normally seen as a hedge against inflation; this time around, far from this theme not working out, the inverse has occurred. Analysts at BCA Research argue that investors recent counter-intuitive reaction underscores the fact that the earlier rally in gold bullion reflected to a large extent a liquidity boom that investors now fear is being unwound.
On May 10, in the hours ahead of an interest rate hike by the Federal Reserve, the US central bank, gold futures rushed to fresh 26-year highs, nudging $700 an ounce. A broad number of other metals and commodities also touched fresh multi-decade highs. At this point, investor interest in metals and commodities, already heavily fanned by the hunt for safe, alternative assets, remained underpinned by robust global economic growth. On the supply side, there were increasing constraints on expansion, not least due to rising skills shortages.
Metals and commodities continued to draw new investor participants. In a report in early May out of Sydney, Citigroup Smith Barney analyst Alan Heap said investors of all kinds held at least $120 billion in US commodity markets in April. Investors held some $30 billion in natural gas contracts, about the same in crude oil, with the two comprising about half the total of 36 metals and commodities surveyed. Natural gas and crude oil were followed by gold contracts with $13 billion invested.
Citigroup said that investments in global commodity funds were around $200 billion in February. For some time, Heap had made out a case that speculators, not least hedge funds, had been key drivers in pushing metal and commodity prices to multi decade highs. Crude oil had increased some 15% from the onset of the calendar year, but gold had rocketed by 31% and copper by a massive 72%.
In a cautionary note in early May, BCA Research warned that rampant bullishness in the commodity pits has bolstered the materials sector but the case for a near-term relative performance correction continues to build. Warning signals were flashing all around, but there was hardly anything new in that.

At the end of January this year, Citigroup warned loudly that a flood of investment funds is driving base metal prices much higher than can be supported by fundamental analysis of supply and demand. Its a bubble which could grow a lot bigger before bursting. Noting that fund investments began to surge in early 2004, Citigroup illustrated how commodity markets have always been strongly influenced by speculation.

It was, for example, surging investor demand that had contributed to the 1994-95 boom. In the current cycle, Citigroup noted, however, that funds deployed were perhaps double the previous high, and that since early 2004, when the current cycle started, funds invested had tripled. The interest in the current cycle extended far beyond base metals; all commodities are involved, said Citigroup, reiterating that all classes of commodities base and precious metals, energy and softs (agricultural goods), have enjoyed substantial price gains.

While every man, his cousin and his dog was taking tips on metals and commodities and the relevant stocks, fundamental supply and demand indeed remained supportive. But it was increasingly clear that commodities, metals and the broader materials sector had become seriously overheated.

BCA Researchs outlook for global economic growth remained constructive, but analysts there maintained a cautious near-term view toward the overheated materials sector. The scales dipped decisively in favour of the sceptics and cynics when the Federal Reserve made its hawkish comments on May 10 this year. The worlds most powerful central bank judged that some further policy firming may yet be needed to address inflation risks. The core US interest rate has risen incrementally from 1% in mid-2004 to 5% after the latest hike.

BCA Research reckons that in the near term, hawkish talk from the Federal Reserve and other central banks will weigh on gold prices, which still look overvalued. Moreover, the argument continues, gold bullion will lose some lustre if inflation fears fade as global growth decelerates. That would be ironic indeed, and would emphasise the risks, known and unknown, of investing in gold bullion, perceived as one of the safest of all investments.

For BCA Research, the bottom line is that while a soggy dollar will provide support, there is more downside for gold prices in the near term. This view would accord with Walkers analysis finding that gold stocks are already looking for gold bullion to fall by up to another $65 an ounce from trading levels around $615 an ounce seen on Friday.

Gold Price Declines in Asian Trade as Rising Dollar Erodes Metal's Appeal

June 12 (Bloomberg) -- Gold prices in Asia fell as a strengthening U.S. dollar eroded the precious metal's appeal as an alternative investment.

Gold has had four straight weekly declines as the dollar climbed 2.2 percent against six major currencies in the same period. Federal Reserve officials have suggested they will continue to boost interest rates to counter inflation. The central bank has raised its benchmark interest rate 16 times since June 2004 to 5 percent.

``Investors are liquidating gold and other commodities'' as the dollar strengthens, said H.M Lee, head of overseas futures team at Woori Futures Co. in Seoul. `` I think prices will fall in the second half of this year after peaking in the second quarter.''

Gold for immediately delivery fell as much as $3.20, or 0.5 percent, to $604.25 an ounce. The metal was down 0.2 percent at $606.15 an ounce at 11:11 a.m. Seoul time.

The price has fallen 15 percent in the past four weeks, and tumbled 17 percent since it reached a 26-year high of $730.40 an ounce on May 12. Gold's four-week decline is its longest falling streak since May 2004.

Gold for August delivery fell $2.20, or 0.4 percent, to $610.60 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 11:16 a.m. Seoul time.

TOKYO, June 12 (Reuters) - Japan's Mitsui Mining & Smelting Co. Ltd. (5706.T: Quote, Profile, Research) said on Monday it had cut its zinc price by 13,000 yen a tonne to 433,000 yen ($3,796), after a regular review of currency and metals market fluctuations.

Mitsui Mining's previous revision was made on June 7 when it cut the price by 19,000 yen to 446,000 yen.

Copper slides as investors flee on inflation fears


Copper, one of the key drivers of a boom in the commodities sector in the past few years, tumbled on Monday as investors fled the metals complex on fears that rising interest rates could slow global economic growth.

Monday's decline in copper prices on the London Metal Exchange dragged sharply down prices for other industrial metals and futures markets in Shanghai and New York.

By 04:06 GMT the benchmark LME copper contract was at $6 950/$6 990 a ton, down $270 or 3,7 percent from Friday's London close. It had earlier bid as low as $6 940/$6 990, the lowest since April 25.

On Friday, the red metal lost $90, or 1,2 percent, to close at $7 220.

"It might be technical selling after the copper market failed to hold the $7 250 and then $7 000," said a metals dealer with a major Japanese trading house.

Consumers in Asia were largely staying on the sidelines on hopes for further declines in copper prices after the market fell below $7 000 a ton, he said, putting major support for copper at the 100-day moving average of around $6 000.

Market sentiment remained depressed due to a strong dollar and fears of slowing global economic growth and inflation, which in turn could dampen demand for industrial metals, while supportive fundamentals in base metals had been largely ignored.

China's imports of copper and copper products in the first five months of 2006 fell 23 percent from a year earlier, while primary aluminium and aluminium alloy exports fell 22,2 percent, customs figures showed on Monday.

"It's very much driven by liquidity," said Rick Holmes, director of Mitsui Bussan Commodities in Sydney.

"At the present moment, you've got the US dollar strengthening, you've got fears of inflation and you've got strong belief that the United States will raise rates ... which gradually means that liquidity is going to tighten up."

Prices for copper, used in wiring, tubes and coins, reached an all-time high of $8 800 on May 11, having jumped more than six-fold since late 2001 on strong demand in China and India, supply disruptions and relentless fund buying.

Since then, copper has retreated as much as 21 percent, but is still up around 58 percent since the end of last year.

In electronic trade, copper for July delivery fell 7,25 cents to $3,1950 a lb after trading as high as $3,2600 on the New York Mercantile Exchange's COMEX division.

Meanwhile, the latest Commitments of Traders data issued late Friday by the Commodity Futures Trading Commission showed that net non-commercial short positions for copper rose to 7 302 lots in the week ended June 6, from 6 372 lots the previous week.

Non-reportable net long positions fell to 83 lots, compared with 453 lots in the week ended May 30.

Shanghai copper futures fell by their daily trading limits on Monday, with the most active August contract down 5 percent, or 3 340 yuan, from the previous settlement to end the morning session at 63 280 yuan a ton.

It was also down 3 290 yuan from the previous close.

Shanghai aluminium futures were also lower, with the most active August contract losing 150 yuan to end the morning session at 20 410 yuan a ton.

LME aluminium was at $2 485/$2 495 a ton versus $2 510 on Friday, while zinc was at $3 270/$3 295 a ton against $3 320.

In other commodities, oil prices held steady below $72 a barrel, while gold edged down below $625 an ounce on a firmer dollar, weakness in global equity markets and losses in industrial metals.

Copper Futures Fall, Posting Biggest 3-Day Decline in 20 Months

June 12 (Bloomberg) -- Copper futures in London fell, staging their biggest three-day decline since October 2004, on concern a rally that drove the metal to a record last month was overdone. Prices in China also tumbled.

Copper has dropped about 20 percent from its all-time peak, and other commodities including gold, silver and zinc have declined, on concern that rising interest rates will slow global economic growth. Central banks from Asia to Europe boosted interest rates last week in a bid to curb inflation.

``Consumption has suffered because buyers are wary of price volatility,'' said Shen Haihua, Vice President of Maike Futures Co. by phone from Shanghai today. ``Consumers aren't buying because they hope prices will fall further.''

Copper for delivery in three months on the LME dropped as much as $340, or 4.7 percent, to $6,880 a ton today. Metal for delivery in August in Shanghai fell as much as 3,340 yuan, or 5 percent, to 63,280 yuan ($7,900) a ton. The contract has fallen about a quarter since reaching a record on May 15.

``Investment funds have probably withdrawn money from commodities,'' said Yuan Fang, a trader at Shanghai Dongya Futures Co., by phone. ``The rally was overdone. Shanghai prices fell more aggressively than London after stockpiles rose.''

Copper inventories in Shanghai rose about 11 percent last week to their highest since Feb. 23. Stockpiles in exchange warehouses in London, New York and Shanghai jumped 3 percent to 172,503 tons as of June 9 from June 1, Bloomberg figures show.


Investment Funds

Speculators have been attracted to copper by forecasts that global demand will outstrip supply this year. Investment funds have increased their holdings of commodities to gain greater returns than those available from stocks and bonds.

HSBC Holdings Plc estimated last month that about $100 billion will be invested in commodity indexes by the end of 2006, compared with $10 billion at the end of 2003.

Five out of eight traders, analysts and investors surveyed by Bloomberg News on June 8 and 9 said copper will drop on the London Metal Exchange this week. Three forecast a rise.

``A 50 percent decline in price would still leave copper at the previous all-time high,'' David Threlkeld, president of Resolved Inc., a copper trading company in Scottsdale, Arizona, said in the Bloomberg News survey.

Hedge Funds

Hedge-fund managers and other large speculators increased their net-short position in New York copper futures in the week ended June 6, according to U.S. Commodity Futures Trading Commission data released on June 9.

Speculative short positions, or bets prices will fall, outnumbered long positions by 7,302 contracts on Comex, the Washington-based commission said in its Commitments of Traders report. Net-short positions rose by 930 contracts, or 15 percent, from a week earlier.

Metals extend declines to test resistance levels. By Kevin Morrison. June 12 2006

Metal prices extended their declines on Monday to test key resistance levels, which, if broken, could trigger further price falls. The copper price, which was the focal point of the metal price boom, fell below $7,000 a tonne for the first time since April 28. It hit $6,980 a tonne in late trade on the London Metal Exchange, down $240 on the day.

The copper price has now fallen 20 per cent from a record $8,790 a month ago.

In spite of the fall in the three-month price, the copper cash price is $7,231, suggesting that the availability of the metal is still very tight.

London-based metal traders said that if the copper price failed to hold at about $7,000, the red metals price next support level was about $6,500, and then $6,000. However, the fall has been accompanied by low volumes.

Other base metals were also weaker. Three-month aluminium was heading to finish below $2,500 a tonne for the first time since April 4. It was quoted at $2,495 a tonne in late London trade, down $20 on the day, and 25 per cent below its record peak of $3,300 a month ago.

Zinc prices, which doubled in price from the start of the year to a peak of $4,000 a tonne almost a month ago, dropped to $3,200, its lowest level in three weeks.

Nickel prices fell to $19,100 a tonne, their lowest level in more than a month.

Precious metals also tested key support levels. Gold hovered just above the $600 a troy ounce, a level it has remained above since mid-April.

The bullion price fell to a low of $603, before recovering to $609.70, up $2 on the day.

Gold has fallen more than 16 per cent from its 25-year peak of $707 a month ago. The latest data from the Commodity Futures Trading Commission showed that the non-commercial position on Comex gold futures fell for the fourth successive week, suggesting that investors are unwinding their positions.

Silvers decline has been more dramatic. The silver price fell below $11 for the first time since the end of March, before recovering to $11.10 a troy ounce, down 5 cents on the day. The silver price has fallen almost 28 per cent from its peak of $15.17 on May 11.

What has held commodities back for the past 200 years?             By Dr Marc Faber.
09.06.2006


I have great sympathy for the view that over the last 200 or so years investments in commodities performed poorly when compared to cash flow-producing assets such as stocks and bonds. I also agree that, as the team at GaveKal suggests, "every so often, we experience a massive break higher in commodity prices in which commodity indices triple in less than three years," which is then followed by a period of poor performance.
Still, we need to ask ourselves why in the last 200 years, commodities, adjusted for inflation, were in a continuous downtrend and whether it is possible that something might have changed in the last few years, which would suggest that this downtrend is about to give way to a sustained out-performance of commodities compared to the US GDP deflator.
The other question is of a more near-term nature. Should commodities, having approximately trebled in price since 2001, be sold, or should we expect far more substantial price increases? I have to confess that I have little confidence that I can answer these questions satisfactorily. Still, the following should be considered.
In the 19th century, and for most of the 20th, industrialisation was concentrated in a few countries, which for simplicity we shall call the Western industrialised world. The world's economy was at the time characterised by an abundance of land, resources, and cheap labour (certainly in the colonies and later in the developing countries) and a relatively limited supply of manufactured goods.
At the same time, growth and progress was concentrated among a very small part of the global economy - either in the Western industrialised countries or among a tiny part of the population (the elite) in developing countries. In addition, there were hardly any other sectors in the economy where productivity improvements were as high as in agriculture and mining.
These factors - abundance of land, labour, and resources combined with huge productivity improvements and limited demand from the then still small industrialised world - may, at least partially, explain why commodity prices failed to match consumer price increases for much of the last 200 years.
Remember that in the first half of the 19th century, manufacturing was concentrated in England with a tiny population, while the British Empire could draw on the supply of commodities from an enormous territory. Then, in the second half of the 20th century, we experienced the socialist and communist ideology, and in India policies of self-reliance and isolation.
As a result, about half the world's population remained largely absent as consumers of goods. (How many motorcycles and cars were there in the Soviet Union, China, India, and Vietnam 25 years ago?) But, while largely absent as consumers, people in these countries continued to produce raw materials and agricultural products.
Therefore, I suspect that the removal of approximately half the world's population as consumers through socialism and communism may have been an important factor in the poor long-term performance of commodities compared to the US GDP deflator, and other assets such as equities.
Since the breakdown of communism and socialism, the world's economic fundamentals seem to have changed very importantly. Initially, the impact of the end of socialism was muted. Production shifted to China, but as had been the case with production shifting from the West to Japan, South Korea, and Taiwan between 1960 and 1990, rising industrial production in former communist countries largely substituted for production in the West.
But over time, in countries such as China, rising investments and industrial production boosted real per capita incomes considerably and made way for a tidal wave of new consumers. In turn, these additional new consumers lifted industrial production further in order to satisfy not only the demand from their export markets but their own needs as well.
Thus, industrial production and capital spending increased further. This led to additional income and employment gains, further domestic demand increases and so on (multiplier effects).
In short, the opening of China and of other countries has permanently shifted the demand curve for consumer goods and services (for example, transportation) to the right and along with it the demand for industrial commodities and, notably, energy.
Now, if all goes well in India (a big if, I concede), then the demand for goods, services, and hence commodities will continue to increase very substantially for another 10 to 20 years.
Indian oil consumption has just recently started to turn up. Should its demand now accelerate, as we believe it will do, it is very likely that China's and India's oil demand could double in the next eight years.
There are a few more points to consider. For much of the last 200 years, developing countries, where many of the world's natural resources are located, had trade and current account deficits with the industrialised world.
These deficits were a constant drag on these countries'
ability to accumulate wealth. But now, through its current account deficit, the United States is shifting around $800 billion annually to the economically emerging world.
This represents a huge shift in wealth from the rich United States to the current account surplus countries.
That this shift in wealth stimulates their economies and consumption, and along with it their own demand for commodities, should be clear. (Rising domestic energy demand in Indonesia amidst falling production has turned the country into an oil net importer!)
Now, for most countries a current account deficit the size of that of the United States would lead to some sort of crisis (for example, the Asian crisis of 1997) and then to a curbing of consumption. However, in the case of the United States, which is endowed with a reserve currency, trade and current account deficits are simply financed by "money printing."
So, at least for a while (but not forever), the shift in wealth to the emerging world won't have a negative impact on America's economy and consumption. And, at least for now, rising demand and wealth in the rest of the world won't be offset by declining demand and shrinking wealth in the United States.
On the contrary, the global imbalances arising from "over-consumption" in the United States have brought about a global economic expansion, which, while unsustainable in the long run, is nevertheless firing on all four cylinders at present.
Simply put, the excess liquidity which the Fed has created - and which it is still creating, I might add - has led to a global and synchronized economic boom. (If money were tight, the asset markets wouldn't rise.)
The following point regarding the demand for commodities is frequently overlooked. In the developed countries, commodities account for a very small part of the economy. As a result, price increases for oil and other commodities have a very minor impact on growth rates and on consumption. However, in the commodity-producing countries (Middle East, Africa, Russia, Latin America), commodity production is an important part of the economy.
So, when commodity prices rise, their economies are, as in the case of the Middle East, turbo-charged. GDP per capita then soars and leads to a consumption and investment boom, which then increases these countries' own demand for commodities.
This is particularly true for resource-rich countries that have a large population and also explains why, in the 19th century, when agriculture was still the dominant sector in the US economy, rising grain prices led to economic booms, while declining commodity prices were associated with crises. (In recent years, financial markets have begun to have a similar impact on economic activity as agriculture had in the 19th century: rising stock markets = boom; falling stock markets = bust.)
In sum, we could argue that the emergence of a large number of new consumers in the world following the breakdown of communism, expansionary monetary policies in the United States, which have led to a rapidly growing current account deficit, the US dollar's position as a reserve currency, which enables the Fed to create an almost endless supply of dollars, and new demand from the commodity producers themselves, have all led to a significant increase in the demand for raw materials.
I am not predicting here that, from now on, the demand for commodities will always outstrip the supply. In time, new technologies (in particular, in the field of nanotechnology), which will permit resources to be used more efficiently, and conservation will curtail demand for raw materials. But until the effects of these factors kick in, a tight balance between rising demand and existing supplies could remain in place for quite some time.

The commodities boom may last another 14 years.                By Jonathan R Laing.                11 June 2006

So claims Jim Rogers, legendary 1970s hedge fund guru and unapologetic commodities bull.

WITH the prices of oil and industrial metals such as copper, zinc and nickel screaming higher in recent months, such observers as Warren Buffett and Morgan Stanleys Steve Roach have proclaimed that commodity markets are in a bubble destined to burst soon.
But Jim Rogers, fabled hedge-fund manager of the 1970s and now ardent commodity bull, finds such talk ridiculous. Indeed, he has been pounding the drum for investing in commodities in recent years in numerous speeches and media interviews, even writing Hot Commodities, a book propitiously published in late 2004 that predicted a coming price boom in everything from aluminium to zinc.
Barrons caught up with Rogers on a recent rainy morning as he worked out on a stationary bike in the fourth-floor exercise room of his five-floor mansion on New Yorks Upper West Side. Bloomberg Radio droned in the background as he talked while occasionally glancing at a laptop computer, perched precariously on the machines handlebars. How can anybody say that a bubble has developed in commodities yet brief pant with sugar 80% below, silver 75% below and corn and cotton less than half their all-time price highs? he huffed. You cant have a bubble when the media has only begun to pay attention to commodities in recent months after years of disinterest. Were now only in the early part of a long-term commodity price boom that has years to run and will likely see literally dozens of raw material prices make new highs. Even crude oil and copper have a long way to go, even though they recently set price records.
How long will the surge run? Based on the past longevity of commodity bull markets (Rogers mentions ones that, by his reckoning, lasted from 1906 to 1922, 1933 to 1953 and 1968 to 1982), the current boom could last eight to 14 more years. The commodities-bubble crowd scoffs at that, just as sceptics did when Rogers predicted the current boom a few years ago
Commodity price booms, says Rogers, are typically the product of years of underinvestment in new productive capacity whether in exploration for new oil or metal deposits, construction of new smelters and refineries or planting of new orange or rubber trees in response to low prices. Meanwhile, demand creeps up all but unnoticed until imbalances suddenly erupt and prices surge. Producers with the possible exceptions of grain farmers and cattle ranchers cant respond quickly because of the long lead times required to finance and build new capacity.
Over the years, commodity prices have tended to surge during periods when the stock and bond markets have laboured, exhibiting what modern portfolio theorists call non-correlation with the financial markets. For instance, commodities did poorly during the stock market booms of the Roaring Twenties and the post-1982 bull market, while outpacing stocks during the Great Depression and the 1970s, Rogers notes.
Recent studies seem to bolster this observation. One, superintended by capital-goods analyst Barry Bannister, now of Stifel Nicolaus, found that over the past 130 years, commodities and stocks have alternated performance leadership in regular cycles, averaging about 18 years. A 2004 study by Gary Gorton of the University of Pennsylvania and K Geert Rouwenhorst of the Yale School of Management that examined market returns from July 1959 through December 2004 concluded that passive, systematic long investments in commodity futures generated total returns comparable to the S&P 500s, while both asset classes smoked the corporate bond market. Even better, the two academics concluded, commodities were less volatile and hence less risky than stocks over those 54 years. And their lack of correlation with stocks made them worthy diversification tools.
Its no surprise, perhaps, that commodities march to a different beat than stocks and bonds. Unlike their financial counterparts, commodities are hard assets that both contribute to and benefit from inflation particularly, unanticipated inflation. Rising inflation hurts stocks by crimping companies profit margins and consumers purchasing power. Inflations fraternal twin, rising interest rates, likewise can savage bond returns by sapping the real value of interest and principal payments.
To Rogers, the past few years have witnessed another changing of the guard; commodities will rule over stocks and bonds for the next decade or more. Inflation will continue to flare and not just because of rising raw-material prices. According to Rogers, new Fed Chairman Ben Bernanke is an amateur with no knowledge of markets whose academic work revolved around how nations could avoid depressions by printing more money. And, finally, he throws into this witches brew the likelihood of a collapse in the dollar as a result of Americas accelerating debtor status. Rogers views commodities as the ultimate refuge from these scourges.
Fundamentals will tell the tale for commodities. Rogers invariably points out in speeches that no major oil fields have been discovered in more than 35 years, nor major new metal-mine shafts sunk in 20 years. And many existing elephant oil reservoirs, such as those in the North Slope and the North Sea, are fast depleting. And who can trust the Saudis to tell the truth about their real oil reserves? That leaves the global market depending on production gains in Russia (a bunch of mafiosi who have probably already reached their peak production level) and such basket cases as Nigeria and Venezuela.
Sure, oil from the Caspian Sea and the Alberta tar sands eventually will hit the market. Wind, solar and geothermal hold promise, as do biomass-generated power and other alternative energy sources. But tapping them will take lots of time and money, warns Rogers.
On the demand side, theres the US consumer, who in the 1990s considered McMansions, gas-guzzling SUVs, fancy appliances and ubiquitous electronics a national birthright, gobbling up petrol, natural gas, electricity, timber, steel, aluminium and lead (for batteries) at a fearful rate. Add to that 1.3bn Chinese and 1.1bn Indians all largely walled off from the global economy during the last commodities boom joining the global scrum for natural resources.
China is now the No 1 consumer of copper, steel and iron ore, and No 2 in the use of oil and energy products to feed its industrial maw, which is growing at a prodigious rate of nearly 20% a year. And the torrent of textiles, refrigerators, colour TVs and computers arent just flowing to overseas outlets like Wal-Mart. Burgeoning economic growth is also creating a Chinese middle class aspiring to better meals and more creature comforts. In Rogers; view, it;s delusional to deny that competition for commodities will continue to heat up as a result of Chinas pell-mell rush from a peasant economy to economic giant. Today, there are only 30m private vehicles on the roads in China, versus 235m passenger vehicles in the US, even though China has almost 4.5 times as many people.

The large commercial interests that trade commodities arent about to let speculators wrest control of prices. ExxonMobil can drown all the index funds, hedge funds and other speculators in the energy markets if anyone tries to manipulate prices, Rogers asserts. Its largely the surging global demand for raw materials that is pushing prices up.
Rogers is the first to concede that the bull market in commodities will have plenty of nasty corrections and volatility along the way. Thats the nature of bull markets. Gold, on its way to its record of $850 an ounce in 1980, suffered a 50% correction in the mid-1970s, falling from nearly $200 to $100. The Rogers Index itself dipped some 25% in the months following 9/11. Then, it resumed its upward trajectory.
Obviously, a major terrorist incident, a bird-flu epidemic, a global financial crisis or a hard landing in the Chinese economy could trip up the commodities bull. But, according to Rogers, any slide would likely be temporary and offer a good buying opportunity.
None of these events change the underlying dynamics of the global economy. Supply will remain constrained for some time. And demand wont disappear. Not with Chinas 1.3bn people, fired by rising aspirations and epic entrepreneurial zeal, driving the market. Consumption is likely to outstrip supply if only because of the developing worlds hunger for a better life.

i wish it would start again now!!!

Gold Prices Plunge in Asia as Investors Expect Higher Rates, Rising Dollar

June 14 (Bloomberg) -- Gold in Asia plunged to its lowest in three months on concern the U.S. Federal Reserve may keep raising rates to contain inflation, reducing the precious metal's appeal as an investment. Silver also declined.

Gold for immediate delivery posted its steepest one-day decline in 23 years yesterday as a report showed U.S. producer prices rose the most in three months in May. The rising cost of gasoline propelled U.S. consumer prices higher last month, economists expect a report today to show.

``We can see funds coming out of gold in a hurry,'' said Ramaswamy Iyer, chief executive officer at Mumbai-based Brics Commodities Pvt. ``Gold will likely continue falling until people are reassured there are no more rate hikes.''

Gold for immediate delivery fell as much as $19.60 an ounce, or 3.5 percent, to $542.45 an ounce. The metal traded at $552.25 at 3:26 p.m. Sydney time.

Spot gold fell 7 percent yesterday, the steepest one-day percentage decline since February 28, 1983. Gold futures in New York fell 7.3 percent, the most in 15 years.

The Labor Department's consumer price index probably climbed 0.4 percent in May due to higher gasoline prices, according to a survey. U.S. interest-rate futures show traders are pricing in about an 86 percent chance the Fed will push its key rate to 5.25 percent at its next meeting on June 28-29, up from 72 percent on May 31.

``People are increasingly pessimistic about the interest rate outlook,'' said Darren Heathcote, head of trading at N.M. Rothschild and Sons (Australia) Ltd., in Sydney.

Higher rates boost the dollar's appeal and the return on assets such as bonds, and increase costs for investors borrowing funds to buy gold.

Silver, Zinc, Copper

Spot gold has fallen 25 percent since touching a 26-year high of $730.40 on May 12. Other metals including silver, zinc, and copper have also dropped in the past month on concern higher interest rates will slow global economic growth and hurt demand for raw materials.

Silver for immediate delivery fell as much as 11 cents, or 1.2 percent, to $9.48 an ounce today. The metal traded at $9.59 at 3:25 p.m. Sydney time.

Gold for August delivery fell as much as $20.40, or 3.6 percent, to $546.40 an ounce in after-hours trade on the Comex division of the New York Mercantile Exchange. The contract traded at $556.50 at 3:26 p.m. Sydney time.

``It's hard to predict, for now, when and where prices of gold will find a near-term floor,'' Tsuyoshi Furukawa, a commodity strategist at Taiheiyo Bussan Co., said in Tokyo. ``In just one month, gold dived below $600 from prices in the $700s in May.''

In India, the world's biggest gold consumer, gold prices for August delivery fell 161 rupees, or 1.9 percent, to 8,407 rupees per 10 grams, or 26,145 rupees ($569) per ounce, at 10:42 a.m. on the Multi Commodity Exchange of India Ltd. in Mumbai.

China's import of copper falls 23 percent
Last Updated(Beijing Time):2006-06-14 10:16

China's import of copper and copper related products came to 821,465 tons in the first five months of this year, down 23 percent from the same period a year earlier.

This was attributed to the country's macro-control policy on the sector, which came into effect late last year, Shanghai Securities News said Tuesday.

Copper prices, which were higher on the international market than the domestic market, also dampened the enthusiasm of importers and speculators, the paper quoted Hu Bin, an analyst of Zhejiang Yong'an Futures Company as saying.

Hu said copper importers were losing 5,000-6,000 yuan (625-750 U.S. dollars) per ton due to the price gap.

Spurred by surging copper prices and high profit, Chinese copper enterprises have been expanding smelting capacity since 2003.

The expansion has resulted in excessive production capacity, experts said, warning that the rapid growth of copper smelting could leave domestic raw materials in short supply.

In the late 2005, five ministries, including the National Development and Reform Commission and the Ministry of Finance, jointly published a circular restricting investment in copper smelting.

It is expected that China's copper output will grow over 8 percent to around 2.8 million tons in 2006. In the first four months this year, China's refined copper output grew 26.7 percent to 937,000 tons.

Do your own research but metals are about to bounce upwards. A really good value stock right now is Central African Mining (CFM). Excellent value with a ton of upside.

DJ Comex Copper Review: Bounces On Short Covering

DOW JONES NEWSWIRES


Short covering enabled copper futures to post a bounce Wednesday following a
heavy sell-off in this and other metals on Tuesday, traders reported. Much of
the activity was said to be in the spreads.

The most-active July copper contract rose 4.55 cents to settle at $3.0560 per
pound on the Comex division of the New York Mercantile Exchange. On Tuesday,
the contract had lost 21.80 cents.

September copper added 2.30 cents to $2.9800.

"We got some short covering after the rout that we've seen as of late," said
Scott Meyers, senior trading analyst with Pioneer Futures.

This was encouraged when the July futures held right around the $3 area both
Tuesday and Wednesday, forming a double bottom at least for now.

"That's a psychological support level," Meyers said. "But if they take out
$3, there could be another 10 to 15 cents on the downside. So it's a critical
level."

A floor trader reported that much of the activity was in the July-September
spread as traders begin the rollover, although there has also been some
July-August.

"Other than that, the ring was a little long early," he said. "They rallied
it up. Then there was short covering afterward with continued fund-type buying.
Other than that, it's been quiet."

Still another trader said Comex copper was underpinned after metal found
"good scaled-down buying" in activity on the London Metal Exchange.

Inventories of copper in London Metal Exchange warehouses fell 950 metric
tons Wednesday, leaving them at 104,550 metric tons. The most recent Comex
stocks data, released late Tuesday afternoon, were unchanged at 8,842 short
tons.

Copper Rebounds on Speculation Drop Was Exaggerated (Correct)

(Corrects industrial production in second paragraph.)

June 14 (Bloomberg) -- Copper rose for the first day in five in London, leading other metals such as aluminum and zinc higher on speculation an earlier decline was exaggerated.

China, the largest consumer of metals including copper and aluminum, said today its industrial production rose 17.9 percent in May, the biggest gain in two years. Metals fell yesterday on concern that rising global interest rates may curb economic growth and the demand for industrial raw materials.

``Nothing goes in a straight line,'' said Jeremy Goldwyn, global head of industrial commodities at Sucden U.K. Plc in London. ``We would expect pockets of corrections and support.''

Copper for delivery in three months on the LME rose as much as $155, or 2.4 percent, to $6,725 a metric ton, after earlier falling as much as 2.4 percent. The metal traded at $6,685 as of 8:58 a.m. London time.

Zinc rose $40, or 1.4 percent, to $3,000 a ton, nickel gained $325 to $17,850 and aluminum added $11 to $2,466. Tin was unchanged at $7,700 and lead dropped $10 to $985.

Metals - Copper gains as inflationary concerns offset by strong fundamentals

LONDON, Jun 17, 2006 (XFN-ASIA via COMTEX) -- Copper turned higher, after trading lower earlier in the session, as concerns over inflation were offset by China's move to hike banks' deposit reserve ratio requirements in a bid to curb liquidity-fuelled lending and surging investments.

At 4.04 pm in London, LME copper for 3-month delivery touched 7,035 usd a tonne -- up 40 usd from yesterday's close -- while 3-month LME zinc was up 15 usd at 3,090 usd and 3-month nickel was up 150 usd at 19,050 usd.

In a widely anticipated move, the People's Bank of China (PBoC) said today it will raise the required deposit reserve ratio of commercial banks by half a percentage point from July 5.

The move marked the latest in a series of measures designed to stem a rising tide of liquidity-fuelled bank lending, which has seen investments surging.

Barclays Capital analyst Kevin Norrish said the move "represents a degree of credit tightening" on the part of the PBoC and that although it was widely anticipated, traders were surprised by how quickly it happened.

He said commodities gained on the news because it essentially showed that what Chinese policy makers were responding to was "stronger-than-expected growth".

"To our mind this is positive for commodities in the sense that it means commodity demand is stronger than expected (so) its not a reason to go short but rather a sign of fundamental strength of the sector," he said.

Other analysts pointed out that even if the move serves to cool China's appetite for commodities near term, it could act as a brake on global inflation in the process.

"If anything, I would emphasis the positive ... It might keep global inflation tame," said Julian Jessop, an economist at Capital Economics in London.

Most global commodities have suffered heavy losses over the past month, prompted by fears that central banks may hike interest rates to combat rising inflation, thereby crimping growth and demand.

"We anticipate current nervous conditions and volatile price action to persist in the near term as market participants focus on inflationary fears, monetary policy tightening and risks to growth," said Norrish.

He added, however, that with "workers at Chile's Esconida copper mine voting on a package of contract demands on Sunday, this remains a market that few will want to be short in." maytaal.angel@afxnews.com ma/jsa

Daily Telegraph. By Malcolm Moore in Rome (Filed: 17/06/2006)


Record copper prices power China's blackmarket demand for hot metal


The recent record price of copper has led to a spate of robberies in Italy and Western Europe, as gangs of thieves seek to sell the metal to China on the black market.

In the past six months at least 10 major copper robberies have been foiled by Italian investigators. The latest was on Tuesday, when Naples police uncovered a criminal ring that had stolen 175 tonnes of copper wiring, worth as much as 1m (682,000), and were about to ship it to China.

Five men were arrested, and a further 17 are under investigation. Police added that the network of copper smugglers included companies at the port in Salerno, as well as shipping and container businesses.

Although the price of copper has fallen in the past few weeks, the commodity has spiked over the past two-and-a-half years thanks to an incessant thirst for copper wiring from Chinese manufacturers.

The global stockpile of copper has been depleted to only three days of current production, and since January 2004 the price of the metal has risen from just over $2,000 (1,080) a tonne to a recent peak of almost $9,000. On the black market, a tonne of copper now sells for as much as $5,000.

Police in Naples found thieves were stealing copper wiring from the construction site of a high-speed rail link between Rome and Naples. Since much of Italy's rail network is electrified, thieves have persistently targeted railway stations.

Two men were recently arrested in the southern city of Catanzaro for stripping wire from a railway station. In the Piedmont and the Aosta Valley, police have arrested 11 people in the past month. The value of the copper they had stolen was about 3m. In March, police in Brescia recovered a similar amount of copper in nine anti-fraud operations.

"The phenomenon was restricted to a few places, but with the rise in price, it is much more widespread," said Claudio Di Cani, head of the Italian Association of Non-Ferrous Metal Producers and Smelters.

Copper gangs are also at work in Germany, France, Sweden and Ireland. In France, repair work on the TGV rail lines is now under police guard. In Scotland last week, 40,000 of copper was stolen from a building site at Edinburgh University.

Church roofs have been targeted, and in Kansas, the Apostolic Church of Jesus had the copper stolen from its air-conditioning system.

Copper Rises for 3rd Day on Speculation Metal Demand Won't Slow

June 16 (Bloomberg) -- Copper rose for the third straight day on speculation that a decline in prices this month, the biggest since May 1999, was exaggerated because economic growth may sustain metals demand.

Copper in New York has plunged more than 12 percent this month, leading a drop in industrial metals as central banks raised interest rates to rein in inflation. Federal Reserve Chairman Ben S. Bernanke, who on June 5 pledged to fight U.S. inflation, said yesterday that the world's biggest economy can withstand rising energy costs.

``What Bernanke said helped the mood'' of copper traders by signaling the Fed's inflation fighting won't kill economic growth, said Edward Meir, a commodity analyst at Man Financial Ltd. in Darien, Connecticut. ``His whole tone was a little bit more muted.''

Copper for September delivery rose 5.35 cents, or 1.7 percent, to $3.185 a pound at 12:36 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would leave copper down 2.5 percent for the week. The metal reached a record $4.04 on May 11. A futures contract is an obligation to sell or to buy a commodity at a fixed price for a specific delivery date.

On the London Metal Exchange, copper for delivery in three months rose $25, or 0.4 percent, to $7,020 a metric ton, after rising as much as 1.9 percent. Prices have more than doubled in the past year.

Reduced Inventories

Inventory in Comex-monitored warehouses fell 8.3 percent to 7,929 short tons yesterday, the biggest decline since April 3. The New York Mercantile Exchange said yesterday it will reduce the limit of outstanding copper contracts traders can hold in the spot month by 30 percent to 175 contracts as warehouse inventory fell to almost a five-month low.

The change, beginning with the June 2006 contract, will be effective at the close of business today. Stockpiles in LME warehouses have fallen 85 percent in the past three years.

``The fundamentals remain very, very strong,'' said James Koppel, managing director at SG Commodities Group, a New York- based trading unit of France's Societe Generale SA. ``You take a look at the LME stock and they are still very, very low.''

Consumer confidence in the U.S., the world's second-largest copper user after China, unexpectedly rose for the first time in three months in June. The University of Michigan's preliminary index of consumer sentiment rose to 82.4 this month from the final May reading of 79.1.

The measure has averaged 88.1 since monthly data were first compiled in 1978. Economists expected the Michigan gauge to fall to 79, based on the median of 60 forecasts in a Bloomberg survey.

Copper, aluminum hold value on world market

Jun 18, 2006 (The Paducah Sun - Knight Ridder/Tribune Business News via COMTEX)

While they aren't "precious" by Wall Street standards, industrial metals such as copper and aluminum have exploded in cost over the past year for similar reasons as gold, silver and platinum.

Yet prices have dropped in the last month because of fears that higher interest rates will slow world economic growth and hurt demand for raw materials. Copper declined more last week than it had in a decade, reminding investors just how volatile the commodities market can be.

Previously, copper prices had almost tripled since early 2005 with demand for many metals shooting up worldwide, especially in rapidly expanding nations like China.

Because scrap copper is totally recyclable, greed fostered enough thievery that the Kentucky Public Service Commission warned May 31 that stealing copper electrical wire can have lethal consequences.

PSC Chairman David Guess said there had been at least three electrocution deaths since March associated with the theft or removal of electric wire. He was backed by representatives of the Kentucky Association of Electric Cooperatives and five power companies including Kentucky Utilities, which has customers in western Kentucky.

"Certainly the amount of money one can gain from copper theft does not compare to the value of his or her life," said Bob Shurtlett, safety and health manager for American Electric/Kentucky Power.

Thieves in Metropolis, Ill., either didn't hear or heed the warning. Sheriff's deputies say copper wire stolen earlier this month from utility poles of the Southern Illinois Electric Co-op may be the work of people driving sport utility vehicles with "Pole Inspector" printed on the sides. Co-op officials say the SUVs aren't theirs.

News reports around the country echo the increased thefts of industrial metals. Aluminum products have been targeted for months as they moved toward an 18-year high.

In December, two Gilbertsville men were jailed on charges of stealing items including aluminum stripped from a pontoon boat on Kentucky Lake. Sheriff's deputies said the men admitted taking the aluminum to a recycling facility.

Peddler trade at recycling firm Tri-State Industrial Services on Moody Road off Cairo Road has increased by about 50 percent in the last six months with escalating metal prices. About 40 percent of Tri-State's business is from people who collect and drop off materials, and 60 percent is commercial.

Aside from foreign demand, particularly in Asia, domestic demand for industrial metal also has increased with a manufacturing surge, Tri-State Controller David Crowell said. "Everything metal-related is pretty hot, and the market looks good."

Even with the recent plunges, both copper and aluminum prices are historically high. Tri-State was paying $2.15 a pound Friday for top-quality copper.

"The normal price for copper has been 80 cents to $1 a pound during the 15 years I've been here," Crowell said.

He said aluminum, which typically sells for 35 to 45 cents a pound, recently has brought 55 cents.

Despite rising prices, theft hasn't been a problem at Tri-State.

However, Crowell recalls a visit earlier this year to an old, 10-acre munitions plant in Jeffersonville, Ind., where a man was electrocuted when he inadvertently grabbed a hot line while trying to steal copper wire.

Copper Drops in London as Investors Sell Metal on Interest Rate Concerns

June 19 (Bloomberg) -- Copper dropped in London as investors sold the metal on speculation the U.S. Federal Reserve will raise interest rates, slowing economic growth and crimping demand for metals. Nickel, aluminum and zinc also fell.

Fed Bank of Atlanta President Jack Guynn will speak today on the U.S. economic outlook after Fed Governor Donald Kohn on June 16 said accelerating inflation may fuel inflation expectations. That prompted investors to increase bets the Fed will increase rates on June 29, slowing economic growth and demand for copper, used to make cables and wires.

Copper for delivery in three months on the London Metal Exchange slid $183, or 2.6 percent, to $6,797 a metric ton as of 12:04 p.m. local time. The metal has dropped 21 percent from a May 11 record of $8,800.

It's ``a reaction to a range of economic news that's causing people some concern about the demand growth outlook,'' said Adam Rowley, an analyst in London at Macquarie Bank Ltd.

The dollar today rose to an eight-week high against the yen, and climbed against the euro, on speculation stronger growth will prompt the Fed to raise interest rates twice more this year.

Central banks in Europe, India and South Korea 11 days ago raised rates to curb inflation.

Among other LME metals, nickel dropped $390, or 2 percent, to $18,800 a ton, aluminum declined $73, or 2.9 percent, to $2,492 and zinc fell $95, or 3.1 percent, to $2,980.

The declines contributed to a drop in commodity indexes that track a selection of metals and other commodities. The Goldman Sachs Commodity Index fell 1.3 percent to 463.37.

Commodity Indexes

Funds that use commodity indexes as a benchmark buy and sell the underlying commodities. The money managed by those funds will rise 38 percent this year to $110 billion, according to Barclays Capital.

The metals ``tend to be moving together,'' said Jon Bergtheil, head of global metals strategy at JPMorgan Chase & Co. in London. ``The lack of performance that oil is generating'' also contributed to declines in metals as investors cut commodity holdings, Bergtheil said.

Oil fell below $70 a barrel in New York on concern the U.S. will raise interest rates. Crude for July delivery fell as much as 74 cents, or 1.1 percent, to $69.21 a barrel in after-hours trading on the New York Mercantile Exchange.

Copper also fell on speculation that China's demand for the metal may fall after the government ordered banks to increase capital reserves to help curb an investment boom. The country is the world's biggest copper user.

Cooling Growth

The People's Bank of China raised the required reserve ratio for commercial lenders by 0.5 percentage point on June 16.

``This measure may have some impact on consumption, as metal buyers find it harder to secure loans,'' said Yuan Fang, a metals trader at Shanghai Dongya Futures Co. The Chinese central bank said today it will curb loans and investment.

Hedge-fund managers and other large speculators decreased their net-short position in New York copper futures, or bets prices will drop, in the week ended Jun. 13, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets prices will fall, outnumbered long positions by 5,656 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- short positions fell by 1,646 contracts, or 23 percent, from a week earlier.

Metals - Copper sharply lower on strong dollar, Chinese moves to slow economy

LONDON, Jun 20, 2006 (XFN-ASIA via COMTEX) -- Copper prices were sharply lower, under pressure from a strong US dollar and moves by top consumer China to slow its booming economy by raising bank reserve requirements.

At 4.42 pm, LME copper for 3-month delivery down 255 usd at 6975 usd a tonne, while 3-month LME zinc was up 50 usd at 3,020 usd and 3-month nickel was up 250 usd at 18,850 usd.

"While supply and fundamentals remain intact, the decision by China's central bank (has) exerted some downward pressure on prices," said Barclays Capital analyst Kevin Norrish.

The People's Bank of China decided on Friday to raise the required deposit reserve ratio of commercial banks by half a percentage point, in a bid to stem liquidity-fuelled lending and surging investments.

Jeremy Goldwyn, global head of industrial base metals at Sucden, said traders were concerned the move will impact domestic demand for industrial metals in China.

He added that China aside, base metals were also being pressured by lower oil prices and by a stronger US dollar.

The dollar, which hit an 8-week high against the yen in Asian trade, is being boosted by expectations the Federal Reserve will raise interest rates again at its June 29 meeting, in a bid to curb inflation.

Tuesday June 20, 06:56 AM

FTSE 100 set to fall

LONDON (Reuters) - Blue chip stocks are expected to fall 20-25 points in early Tuesday trade, financial bookmakers predict, erasing most of Monday's rise when the index closed at 5,626.1 points.

Weaker equity markets in the U.S. and Asia could weigh on investor sentiment in Europe, dealers say, with only British Energy (LSE: BGY.L - news) among FTSE 100 (news) companies delivering results.

"With relatively little on the economic or corporate calendars, it's difficult to see where any real upside may come from," said Matthew Buckland, a trader at CMC Markets.

Lower commodity prices could dent the market, with stocks such as miner Rio Tinto (LSE: RIO.L - news) falling in Australian trade as fears about economic growth in the U.S. and China hurt copper prices and a stronger dollar knocks the cost of gold.

"With little economic data this week the market is likely to yo-yo along as its mood changes daily," said Oliver Stevens, a trader at IG Index.

20 June 2006
Copper slightly down after erratic session: LME

Source: Dow Jones

London Metal Exchange copper ended slightly lower Tuesday after an erratic trading session with limited trading interest.

Three-month prices drifted lower on bearish technical indicators in the pre-market session after touching an intraday high of $6,870 a metric ton.

Analysts forecast a fall to the next major support level at $6,200/ton but trade buying helped prevent further falls until the afternoon, when prices reversed down in illiquid trade in response to a stronger dollar against the euro.

Source: FN Arena News 21 June 2006

Putting the bull/bear base metal argument into perspective


Uncertainty is the mother of volatility and recent volatility in base metal markets (and subsequently in resources stocks) only goes to prove there is little consensus of opinion on the "where to from here?" question. Even if opinions are held one way or another, they are clearly on stand-by to be reversed at a moment's notice.

Merrill Lynch analysts have sought to tackle this debate by at least offering up some scenarios and ascribing their own levels of perceived probability to each. As to whether this will comfort befuddled investors is another matter. It comes down to whether or not you like the odds.

Firstly, let's look at the bull side of things the positive indicators of upside in metal prices.

Has the supply/demand situation really changed at all? From about two years ago, resources analysts were entertaining the idea of a super cycle but continuing to warn of a reversion in prices at least towards a longer term average. Debate then ensued as to whether we had made a secular jump such that a new average price would be established, higher than the previous long term average, or whether markets would revert to the mean just as they always have.

Driving the demand side, of course, was China certainly a new player on the block. But ever since every resource analyst had been in short pants, or pigtails, metals markets had moved in cycles. What goes up must come down. The cyclical basis is that mining and smelting are time-consuming and costly ventures that cannot be approached flippantly. If you're going to invest a lot of time and money into production, you'd want to be confident prices are attainable to economically justify your venture.

Before China took off, prices were low too low. For years they were too low, so for years metal production and associated infrastructure investment was neglected. When China did take off, there was a rapid realisation that the supply side was inadequate, and that things had better happen fast.

The usual, historical response to rising metal prices is subsequent investment in the supply-side, which leads to supply eventually catching up to demand after a lag. During the lag, prices keep rising until balance is reached, and then they fall back again as supply outweighs demand. After a lap of the board we have come back to "Go".

Slowly but surely, analysts came to realise two important aspects of the China story.
(1) Demand was astronomical far greater than initially forecast. (2) Supply was going to take a helluva lot longer to catch up than would normally be the case. Not only were there not enough mines and smelters, there weren't enough ports, ships, trains, trucks, railway lines and even qualified people to restore a demand/supply balance in a hurry. The super cycle theory was cemented, and the time frame was stretched out to distant years. Analysts were forced to acknowledge a new world.

In 2005-06 a new problem emerged on the supply side hold ups. If you drive things to hard too fast they tend to break down and need to be fixed. If you become all optimistic about the production capabilities of your new mine chances are you're in for disappointment. And if you make too much money from mining, it won't be long until your lowly workers start exercising collective power in order to participate in the spoils as well.

Shut-downs and strikes have beset the metals markets, and while shutdowns are hard to predict, strikes are sure to continue as large mines across the world hit predetermined wage negotiation points over the next year or more. The supply side will continue to be restrained.

Metal inventories are still at 10-year lows. Restocking has been occurring lately, which takes metal out of the consumable market and into a hoarding phase. This phase is, however, expected to end soon after what Merrill Lynch describes as "an aggressive six months".

Now consider the demand side. It is a logical assumption that prices cannot go up ad infinitum, and that eventually demand will drop when the marginal benefit of acquiring a commodity is less than the price required to be paid. Analysts have been predicting a slowing of Chinese demand for a while now, but signs of a slowdown have been few. It's not that hard to consider why this is the case. As China's economic development continues, that which the Western world takes for granted becomes affordable to more and more of China's masses. Phones, computers, fridges, cars, houses.

Take cars as an example. There are presently 14 million cars in China. That figure is expected to double in four years. Add trucks, buses et al, and there should be 55 million cars on the road by 2010. How much metal goes into a car? (Let's not worry about oil or pollution at this point). How much copper goes into wiring a fridge, a building, or a telecommunications system? It is hard to contemplate there being anything other than ongoing demand coming out of China, and its cohorts, India, Russia, Brazil.

Such are the demand and supply "fundamentals". Now, turning to the bear argument, consider the negative indicators.

The world is concerned about inflation. Metals prices have gone up, so the price of anything made from metal has gone up. The oil price has gone up, and this is the most fundamental factor behind inflation fear. Higher oil/energy prices simply mean higher prices for everything, from petrol to plastics to food transported across countries or oceans.

Inflation has been slow to appear. Everyone has been expecting a sudden jump in inflation, but to date there has been an offsetting factor. As China has become the production centre of the world, low wages and high productivity have meant the price of many household goods, from clothes to computers to cars, have fallen.

While inflation appeared to be under control, central banks were not in a hurry to raise interest rates and jeopardise economic growth. From the US to Europe to Japan. This meant capital was cheap, and this allowed investment in assets producing a healthy return such as metals. The US was the first major economic power out of the blocks to raise rates, and just when everyone thought the tightening phase was over, Ben Bernanke came along to scare everyone into believing it wasn't.

Supporting Bernanke's strategy were US inflation data, particularly the CPI that set the whole market correction ball rolling.

Now central banks across the world are raising rates. Europe is into the swing of it, Japan has rediscovered the need for it, and even China has succumbed to the inevitable. What do higher global rates mean?

Firstly, a credit scare if easy money is no longer easy then speculative investments like metals are no longer as attractive. Time to get out. Secondly, a slowdown in global economic growth, including growth in the world's largest economy (US) and fastest growing (China). If investment capital costs more, investments will not be entered into at the same pace. Business confidence falls (as it has already) and demand falls as a result. If demand falls, prices fall.

China has been publicly discussing the need to slow its economy. The hard part is slowing it without killing it off. But China's commodity consumption is out of control, and the growth of its industry is so frenetic that it can only end in tears. There just cannot be so many steelmakers, for example, before there's just too much steel.

China is trying to avoid a "hard landing", but either way, some slowing is required. This works against further astronomic surges in commodity prices.

Weighing up the bull and bear arguments, Merrill Lynch has come up with three scenarios.

(1) The "Peak Bull Case". We overcome the present correction/slowdown in about six month's time. Global growth then rebounds in 2007 and we're back on track, with demand continuing to run above supply and supply being constrained by ongoing interruptions. Metal prices surge to new highs.

(2) The "Bull Trend Case". We overcome the present correction/slowdown in about six month's time and growth returns in 2007, albeit at a more subdued pace, some 1.00-1.25% below levels experienced in 2006. G7 economies are softer and although inventories are tight, destocking keeps a rein on things.

(3) The "Bear Case". We've had our fun and now it's all over. We won't see such highs in metal prices again. Demand will begin to disappoint and supply will begin to catch up. Prices will start heading back to those aforementioned long term averages.

Which do you see transpiring? Merrills ascribes a 10% probability to the Peak Bull Case, a 60% probability to the Bull Trend Case, and a 30% probability to the Bear Case. If this seems like an each-way bet to some extent then think about it this way: it's highly unlikely we'll see the same level of upside pandemonium again, but a healthy bull trend is twice as likely as a depressing bear trend.

Merrills believes in 2-3 more months of pain. By pain we're talking volatility, and the only way for volatility to be shaken out of the market is for prices to fall further to levels where benched investors begin to feel comfortable about returning back to the game. Within 6-12 months the bull trend will have re-emerged, provided China can slow its economy gently. If not, the bear case will increase in likelihood.

From the resources stock perspective, Merrills is tipping another 10-20% downside, driven by further falls in metal prices towards "reasonable" levels. Diversified resources stocks will suffer less, pure-plays will suffer more.

For Australian pin-up stocks this means further falls of around 10% for the giants BHP Billiton (BHP) and Rio Tinto (RIO) moving out to 12% for the likes of Alumina Ltd (AWC), and 20-30% for the Zinifexes (ZFX) of this world.

Merrills advice is if you're long pure-play stocks (and they're not major takeover targets), be prepared to wear 20% downside or get out now. If you're long diversifieds, best to hang on, and perhaps build at lower levels. If you're underweight resources altogether, wait. You will have a better buying opportunity soon.

If you want something to buy now, Merrills suggests the bulk commodities, steel and uranium. As BHP and Rio are the big bulks, and they're set for a fall, iron ore fans may need to look elsewhere. Coal-wise, Merrills likes Excel (EXL) and suggests the outlook for thermal coal remains robust for three years. ERA (ERA) looks cheap in the uranium stakes

Commodities rebound as risk appetite returns

By Kevin Morrison

Published: June 22 2006 18:21

Commodity markets started briskly with strong gains across the board in a sign that investors had regained their risk appetite.

However, towards the end of Thursday, most of the gains had turned into declines or pared gains in the case of oil.

In London, IPE Brent futures for August delivery gained 41 cents to $69.58 a barrel in late afternoon trade, off its intra-day peak of $70.01.

August West Texas Intermediate added 22 cents to $70.55 a barrel in late morning trade on the New York Mercantile Exchange. Oil prices have been boosted by the weekly US inventory report, that showed that petrol stockpiles had not risen by as much as expected. This in turn fuelled concern over tight supplies this summer when US petrol demand peaks.

However, gold prices dropped from their intra-day high of $594.80 a troy ounce to $584.40/$585.40 in late London trade, down almost $5 on the day. The market ignored positive comments from a Chinese central bank official, who said China should convert some of its foreign exchange reserves, the worlds largest, into gold to hedge against the dollars weakness.

Converting part of foreign exchange reserves into gold reserves would help protect and increase the value of reserve assets, said the article written by Luo Bin, an official with the central banks accounting and finance department, and Zhao Qingming, an economist at the banks institute of finance and banking.

The authors, writing in the May edition of the Chinamoney magazine, said buying more gold with foreign exchange reserves, at a record $875.1bn at the end of March, would help ease upward pressure on the renminbi.

Copper prices rose by more than 5 per cent at one stage to more than $7,000 a tonne yesterday, before succumbing to a bout of profit-taking that dragged prices down by more than $130 to $6,677 a tonne on the London Metal Exchange. Copper in LME registered warehouses extended their fall to critically low levels.

Robin Bhar, base metals strategist at UBS, said copper stocks held in the warehouses of other metal exchanges were similarly very low. The combined copper stocks of the three exchanges, LME, Comex and Shanghai Futures Exchange currently total 168,000 tonnes compared with about 800,000 at the end of 2003.

Mr Bhar said the current total equates to just under four days of global copper consumption and although there are stocks held by producers, merchants and consumers, exchange stocks are reported on a daily basis and are highly visible to the market.

It comes of little surprise then why copper prices continue to remain very high - there is little or no buffer against unexpected supply problems, of which there has been many this year, with consumers scrambling to restock amid strong demand, he said.

Market report: Thursday close
Mickey Clark, Evening Standard
22 June 2006

A COMMODITIES-fuelled rally and a strong performance by Wall Street overnight led share prices in London to high ground today.

Mining shares and oil companies were to the fore again as the FTSE 100 index climbed back above 5700, sporting a lead of 19.1 points at 5684.1. The price of crude oil on the world market rose back above $70 a barrel, reflecting growing tension over Iran and North Korea.

The price of raw materials such as copper and gold was also up sharply, with copper supplies threatened by a proposed strike in Chile.

22 June 2006. Source: Dow Jones

Chile Escondida receives union demands for pay increase


Chilean mining company Minera Escondida Ltda. Thursday said it has received the draft of a collective bargaining agreement from its workers.

The BHP Billiton (BHP) mine "has received a draft collective agreement, prepared by Labor Union No. 1 as part of the normal renegotiation process," it said in a press release.

"We will review the draft agreement and are committed to reaching an agreement which is of mutual benefit to both our employees and our business," it added.

The sole union at Chilean copper mine Escondida seeks a 13% pay increase and a $29,299-per-person bonus, the union said Wednesday.

The 2,055 miners that make up the union and represent 97% of union- eligible workers at the mine argue that the city of Antofagasta is the second most expensive in the country and that their wages must be adjusted accordingly.

The bonus sought as the sum of a copper-price bonus and the end-of-conflict bonus miners usually receive after successfully completing negotiations represents 5.4% of Escondida's first-quarter profits, the union said in a statement.

The company has 15 days to respond, according to local labor laws. Contracts expire Aug. 2.

In their previous contract negotiations in 2003, when copper prices averaged $0.66 a pound, Escondida workers obtained a 1.5% wage increase.

Copper prices have soared since mid-2003, with periodic labor disputes contributing to price spikes. Traders in London said the union's tough talk contributed to price gains in copper in Thursday trading early. LME copper ended at $3.19 per pound, according to data published by Chile's government copper commission.

While an Escondida strike would be about two months away, the union doesn't rule out striking sooner if the company disregards their petition.

According to Chilean labor laws, a strike could only start after the contracts expire. The law also allows for two five-day mediation periods after the contract expiration date to avert a possible strike.

Escondida is the world's largest privately owned copper mine. It produced 1,271,472 metric tons of copper last year, as well as 182,472 ounces of gold.

BHP Billiton owns 57.5% of the mine, with 30% owned by Anglo-Australian company Rio Tinto PLC (RTP), 10% owned by a Mitsubishi-led Japanese consortium, and 2.5% owned by the International Finance Corp.

Fri Jun 23, 2006 - By Martin Hayes

Nickel set for further strength as LME stocks fall


LONDON, June 23 (Reuters) - Nickel prices are near May's record highs and look set to remain strong through to next year in a tightly supplied market.

On the London Metal Exchange (LME), three months prices were around $19,500 a tonne on Friday, steady from Thursday levels and against a peak of $23,000 a month ago.

The market is tight, with LME warehouse stocks at their lowest since September 2005 and the cash/threes benchmark backwardation at $880/930, near 13-month peaks of $1,000 a tonne.


Although this acute tightness is set to ease in the coming months, the market is still heading for a significant supply/demand deficit this year, analysts said.

"We went from a situation last year when the market was in surplus, as stainless-steel producers cut production, to where we will see a large deficit as demand is strong," Adam Rowley of Macquarie Bank said.

"We are going to see a large deficit of around 16,000 tonnes this year," he said.

Annual production and consumption is in the region of 1.2-1.3 million tonnes.

Nickel's main end-use is in the manufacture of stainless steel -- some two-thirds of annual consumption -- and this sector has been bright recently, traders said.

"There has been a lot of physical business over the last few weeks, a lot has been booked out to the Far East," a trader said.

The market was also enboldened by bullish comments on Thursday by Canada's Inco Ltd. (N.TO: Quote, Profile, Research). Peter Goudie, Inco's vice-president of marketing, said he expected the market to be very tight for several years as demand outstripped limited supply growth.

LME warehouse stocks have been spiralling lower from February's six-year highs of 36,822 tonnes and now stand at just 12,588 tonnes, the lowest since September 2005.

When cancelled warrants are taken out of the equation -- metal that is earmarked for removal -- just 8,712 tonnes are freely available.

This has meant nearby tightness, with the key daily premium for TOM/next (tomorrow/next day) -- belated business against the previous day's cash -- hitting $50 as large long positions are in place.

Latest LME data show one long accounts for between 30 and 40 percent of physical warrants and cash and another for 50-80 percent, meaning backwardation-limit restrictions have come into play.

"That (tightness) is probably going to ease off now. The cancelled warrants will come out, but we are expecting more stock in the next two or three weeks," the trader said.

More metal will be shipped by Russia's Norilsk Nickel (GMKN.RTS: Quote, Profile, Research) as it has begun loading the first cargo ships at its main export outlet, the Arctic port of Dudinka, which has reopened after a seasonal halt, traders noted.

Norilsk interrupts loadings of nickel, copper and cobalt bound for export markets and concentrate for its refineries on the northwestern Kola peninsula at the end of May, when ice breaks up on the Yenisey river where Dudinka is located.

Source: MarketWatch. - 23 June 2006

Gold closes higher; gains 1.1% on the week


Gold futures closed higher Friday and gained 1.1% on the week, as traders shrugged off dollar strength to focus on the yellow metal's longer-term outlook as a hedge against inflation and global political instability

After declining for most of the day, gold for August delivery reversed course shortly before the close to finish up $2.60 at $588.0 an ounce on the New York Mercantile Exchange. The contract ended at $581.70 a week ago.

Gold had dropped as low as $574.5 on Friday under pressure from the rallying dollar, which surged to two-month peaks against the euro and yen on Friday. The U.S. currency gained strength from market expectations the Federal Reserve will raise rates again next week.

Other metals prices were mixed. July silver added 7.50 cents to $10.285 an ounce and July copper was up 10.50 cents at $3.2405. July platinum dropped $9.20 at $1,166.9 an ounce and September palladium was down $4.10 at $309.80 an ounce.

After suffering considerable short to intermediate technical damage, gold is most likely going to have a broad trading range of $525-$625 through the summer doldrums," said Peter Grandich, editor of the Grandich Letter. "The long-term secular bull market remains intact and a new yearly high above $736 before year-end is still in the cards."

Deutsche Bank also recommended building long gold exposure, although it's bearish on gold and silver in the short term.

"The latest U.S. capital flow data reveal a further improvement in the country's modified basic balance," said analyst Michael Lewis in a note to investors Friday. "This offers a summer of U.S. dollar strength and with it further downside in the gold price. Even so we remain long-term gold bulls."

The metal is still an attractive hedge against "U.S. weakness, inflation shocks and skittish equity market conditions over the coming year," Lewis said.

Supply-demand fundamentals and investment influences are the factors affecting the gold market and both are supportive of gold, said Alan Heap, a Citigroup analyst based in Sydney.

"Mine production is constrained," Heap said. "It is expected to increase by only 2% this year. Demand has been affected by the high prices but will likely recover, as jewelry manufacturers stocks are depleted, even if prices remain high." The economic environment, particularly the inflation risks and global political tensions, also favor gold, Heap said.

At its meeting next week, the Federal Open Market Committee is expected to increase U.S. interest rates to 5.25% in its 17th consecutive rate hike.

"It [the expected Fed rate hike] is discounted into financial markets, but that does not mean there will not be a response on the day," Heap said.

James Moore of TheBullionDesk.com said that gold's performance in the next few days will be closely related to the movement of the dollar ahead of the FOMC decision on interest rates.

"For the moment $550-600 should offer a broad trading parameter although developments in the U.S./Iran and U.S./North Korea nuclear argument still have the potential to trigger a break out," Moore said.

Earlier in the week, North Korea was reported to be preparing to test launch a missile and Iran said it will only reply to a U.N. incentives package to dissuade it from enriching uranium only by mid-August, disregarding U.S. calls for a quicker response.

On the supply side, gold inventories were unchanged at 8.03 million troy ounces as of late Thursday, according to Nymex data. Silver supplies rose by 22,815 troy ounces to 104.6 million.

Copper fell by 64 short tons to 7,417.

Bloomberg - 23/06/2006

Copper Rises Most in a Week in New York on Signs Demand May Climb in U.S.


June 23 (Bloomberg) -- Copper prices rose the most in a week after a report showed a gain in orders of most U.S.-made durable goods, renewing speculation that demand will grow for metal used in wiring for cars, machinery and appliances.

Orders excluding transportation equipment rose 0.7 percent in May, including improved demand for computers and communication equipment, the Commerce Department said today. Copper, after doubling in the past year, has plunged 24 percent from a record high last month on concern rising global interest rates would slow economic growth and metals demand.

``Manufacturing continues to be in decent shape, and that's a positive for copper,'' said Donald Selkin, director of equity research at Joseph Stevens & Co. in New York. Current copper prices are ``a good area to buy'' after falling from the record high, he said.

Copper futures for September delivery rose 3.05 cents, or 1 percent, to $3.079 a pound at 10:24 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest gain since June 16.

Copper for delivery in three months on the London Metal Exchange rose $16 to $6,725 a metric ton.

Gold May Rise on Concern Fed Will Struggle to Curb Pace of U.S. Inflation

June 26 (Bloomberg) -- Gold may rise for a second week on speculation the Federal Reserve will need to keep raising interest rates to curb inflation, boosting demand for an alternative to stocks and bonds.

Eleven of 28 traders, investors and analysts from Sydney to Chicago surveyed by Bloomberg News on June 22 and June 23 advised buying gold, which rose 1.1 percent to $588 an ounce in New York last week. Nine said to sell and eight were neutral.

Gold rallied 50 percent since June 2004, when the Fed began a series of 16 straight increases in the overnight lending rate between banks to combat higher energy, commodity and consumer prices. Fed Bank of Atlanta President Jack Guynn said last week inflation remains ``bothersome'' and that he sees ``elevated'' risks in the pace of price gains.

``The Fed is behind the curve,'' said James Turk, founder of Nassau, Bahamas-based GoldMoney.com, which stores gold for investors. ``They have been more focused on trying to keep the economy from buckling under than to stop the growing inflationary pressures.''

Gold futures for August delivery rose $6.30 last week on the Comex division of the New York Mercantile Exchange, ending five straight declines. The gain was expected by a majority of analysts surveyed June 15 and June 16. The Bloomberg survey has forecast the direction of prices accurately in 69 of 113 weeks, or 61 percent of the time.

Fed policy makers meet June 29 in Washington to review the current benchmark interest rate of 5 percent. The rate was at a 46-year low of 1 percent two years ago.

Too Little, Too Late

``Even if they raise rates by one-quarter, which is what I expect, it's still too little, too late to stop gold's bull market,'' Turk said.

U.S. consumer prices excluding food and energy rose 0.3 percent in May, capping the biggest three-month gain in the so- called core rate since March 1995, the Labor Department said June 14. The rise last month was the third straight that exceeded analysts' estimates.

Some investors buy gold to preserve purchasing power in times of accelerating inflation. Gold futures surged to $873 in 1980, when a jump in the cost of oil led to a 13 percent annual rise in U.S. consumer prices.

The Fed will raise the overnight lending rate by 0.25 percentage point this week, all but two of 122 economists said in a separate Bloomberg survey. Fed Chairman Ben S. Bernanke told a June 5 conference in Washington that recent gains in inflation are ``unwelcome.''

Longer Rally

``This gold bull market is only five years old,'' said Gregory Orrell, who manages $150 million gold investments including the $100 million OCM Gold Fund in Livermore, California. ``It still has at least another five years to go.''

The Fed's rate increase this week probably will be the last for this year because ``the U.S. economy is softening and the housing market is softening,'' Orrell said. ``The Fed doesn't want to totally implode the system. There's too much debt out there.''

The Conference Board's index of leading economic indicators fell last month by the most since September, the New York-based group said June 22. The index, which predicts economic activity for the next three to six months, dropped 0.6 percent after a 0.1 percent decline in April.

Building permits, a sign of future construction, fell 2.1 percent to an annual pace of 1.932 million, the lowest since November 2003, the Commerce Department said June 20. The National Association of Home Builders/Wells Fargo's index of builder confidence declined to an 11-year low of 42 this month, from 46 in May. A number below 50 means pessimists outnumber optimists. The index hasn't increased for the last eight months, the longest such stretch since 1994.

Dollar Weakness

Demand for gold also is improving on speculation the dollar will weaken against the euro and yen. Gains in the U.S. currency contributed to a 24 percent decline in gold from a 26-year high of $732 an ounce on May 12.

``We are starting to see gold claw back some of its losses as the market contemplates a more medium-term view of the dollar,'' said Alastair McIntyre, head of marketing at ScotiaMocatta in Hong Kong.

``Dollar strength is squeezing every possible drop of one or two rate hikes in the future,'' McIntyre said. ``But once the market figures out that that's it, along with prospects of a rate cut next year and Japan and Europe potentially tightening, the dollar has nowhere to go but down. Gold is sensing this and now is shaking off the correction.''

``The next rate hike, which was pressuring gold and stocks, is now well discounted,'' said Adrian Day, who manages $105 million at Annapolis, Maryland-based Adrian Day's Asset Management. ``The sell-off has probably been overdone. Below $600 is a good level to be building positions for the longer term.''

Platts Metals Alert. - 06/26/06

What's Moving The Market?

With prices little changed from their previous closes and trade very much subdued, a trader said Monday that summer has officially arrived with on the London Metal Exchange. News that should set tongues wagging in the market is the three way, $56 billion tie-up between Phelps Dodge Corporation, Inco Limited and Falconbridge Limited. The new company will be named Phelps Dodge Inco Corporation. The move should create "the world's leading nickel producer, the world's largest publicly traded copper producer and a leading producer of molybdenum and cobalt." Copper was bid at $6,820/mt at 0943 GMT up modestly on its previous close on Friday at $6,780/mt. "There's very little happening in the market at the moment, interest is very low, trade is very light. Traders are waiting for the US to make their decision later in the week on interest rates and until then summer has landed in the metals market," the London-based trader said.

Analyst with UBS Robin Bhar echoed these thoughts. "Metals markets have opened quietly steady this morning with players reluctant to take on fresh exposure until the Fed's decision on interest rates is announced late this Thursday," he said, adding: "Metals are still ranging in wide trading bands reflecting low volumes and liquidity." This means that while traders may be hugging the sidelines, a short sharp move could take place in the market on the back of such limited liquidity. However, on the FOMC interest rate decision, Bhar suggested that "While we are not expecting a 50 basis point rate hike this week, neither are our US economists expecting any major changes in the statement from the May meeting, which should leave market pricing of a further hike at the August meeting intact." Copper stocks remain at 95,050 mt which is about four days of global copper consumption, without taking into account stocks held by producers, consumers or traders elsewhere.

"The funds have got what they want and they've taken some profits so until they see prices that they think they can make even more money on, they're likely to stay out of the market," the trader said, adding: "We're seeing very little from physical consumers they have all stocked up, so we've very little business slated for this week."

Financial Times - Published: June 26 2006 17:26

Commodity markets rangebound awaiting Fed - By Chris Flood


Commodity markets were rangebound in light trading on Monday as investors looked ahead to this weeks Federal Reserve meeting when the outlook for US interest rates and growth should become clearer.

IPE August Brent moved 1 cent higher to $69.94 a barrel while Nymex August West Texas Intermediate added 18 cents to $71.05 a barrel.

Irans threat over the weekend that it was prepared to use oil as a weapon in any confrontation with the West over its nuclear enrichment programme provided some support for energy prices.

The impact was limited because hedge funds have significantly reduced their long speculative positions in crude. The Commodity Futures Trading Commission reported a further decline in long positions last week.

Iraqs oil minister said the countrys output could rival Saudi Arabias within a decade after daily production reached 2.5m barrels in May, starting to recover from its post-war collapse.

Oil demand in China continued to grow strongly in May with a 13.5 per cent year-on-year increase. Refiners have increased output and cut exports ahead of a domestic price increase to meet peak summer demand.

Price action for precious metals was muted as many investors attended a conference in Switzerland organised by the London Bullion Market Association.

Gold edged 0.7 per cent lower to $579.15 a troy ounce and dealers said a period of sideways trading was likely with bullion balanced between inflation fears and growth concerns.

Silver fell 1.8 per cent to $10.11 a troy ounce while platinum rose 1.4 per cent to $1,182 a troy ounce and palladium gained 3 per cent at $310 az troy ounce.

The $40bn takeover of the two Canadian miners Inco and Falconbridge by US rival Phelps Dodge underlined industry confidence that metals prices will stay strong.

Copper rose 2.3 per cent to 6,937.5 a tonne in late trading in London. However, dealers said that some Chinese buyers were waiting to see how prices developed after the recent pull back in the market.

Global copper mine capacity over is forecast to grow at 4.3 per cent a year until 2009, exceeding the expansion of smelter capacity, according to the International Copper Study Group. The ICSG said annual mine capacity was expected to reach 19.6m tonnes in 2009, a total increase of about 3m tonnes or 18 per cent from 2005.

Nickel increased 2.7 per cent to $19,775 a tonne supported by a 750 tonne decline in London Metal Exchange stocks to 11,800 tonnes.

Source: MarketWatch - 26 June 2006

Gold dips as investors wait for Fed decision



Gold futures closed slightly lower Monday, finding little support in a weaker dollar as investors kept to the sidelines ahead of a widely expected interest-rate increase at the Federal Open Market Committee meeting this week

Gold for August delivery closed down 30 cents at $587.70 an ounce on the New York Mercantile Exchange.

"Gold is starting the final week of June on a mostly neutral note, drifting slightly higher but not making any true attempts at piercing the $600 mark that lies just above," said Jon Nadler, investment products analyst at Kitco.com. "For the moment, traders appear satisfied to await the FOMC meeting and the results thereof."

After staging a broad rally last week that pressured gold prices, the dollar declined against major currencies on Monday.

James Moore of TheBullionDesk.com said that the dollar and the political uncertainty surrounding the nuclear ambitions of North Korea and Iran will continue to affect gold this week.

"More of the same is expected in the week ahead, particularly with the FOMC set to meet Wednesday," he said.

Most economists are expecting a quarter-point hike, with some even forecasting a half point hike, following a stream of recent anti-inflation speeches from Fed officials.

A member of the governing board of the Swiss National Bank said Monday that central banks were unlikely to change their gold reserves in the foreseeable future, according to research firm Action Economics. SNB's Philipp M. Hildebrand made the remarks at the annual meeting of the London Bullion Market Association in Switzerland.

Posted: Mon, 26 Jun 2006 07:10 | Moneyweb Holdings Limited, 1997-2006
Julius Cobbett

Take profits in commodities experts

TWO of Moneywebs regular market commentators are nervous about the prices of commodities stocks. Advantage Asset Managers deputy MD Wayne McCurrie says, if there is any market overvaluation its in the resources shares.

McCurrie looks at the price:earnings multiple of the two sectors. The overall market is 15. The banks are 11, the resources are 20. So what that means is, relative to the banks the resources are twice as expensive.

Peter Major, mining analyst at Cadiz, agrees that its time to take some money off the table in commodities shares. He says that on June 13, after the whole index had fallen about 20% in the space of a month, there was some value in the smoking rubble.

But now theyre back up to where they were over a month ago, says Major, and I cant see the rand losing very much more. But I dont see the commodity prices going up in dollar terms.

For the year to date the resources and gold indices are up 16%, while the financial and industrial indices are up 2,5% and 1,8% respectively.

So if you say, gee, thats what I made so far this year, argues Major, its almost logical to think that in the next six months youll probably get a reversal of those.

Says Major: I hate giving up my favourite sector, which has always been the greatest sector over most time periods but, yes, with the rand at R7,50 and the commodity cycle on the way down, as we all say and agree, the other two asset categories by the end of the year will probably beat resources from here on.

McCurrie argues: We all recognised three years ago our market was dirt cheap, and weve had a fantastic run. The banks are almost the same price as what they were three years ago on a price:earnings ratio. So literally they are within 10 or 15% of where they were three years ago, and that was incredibly cheap at that stage.

McCurries sentiments echo those of a number of top-performing money managers. In the quarter to March 31 Allan Grays equity fund increased its exposure to banks. Standard Bank rose from comprising 6,5% of the fund to 8,1%. Nedbank underwent a similar increase from 4,6 to 5,1% and Absa from 3,6 to 4%.

Investecs John Biccard is also bullish on banks, which comprised about 20% of his fund at the end of the quarter.

Speaking on Moneyweb Radio earlier this month, Biccard downplayed concerns that rising interest rates will put bank shares under pressure. Moderately high interest rates do not affect banking earnings. Its substantially quick, large quick rises in interest rates do affect banking earnings, but under a scenario of a few percentage points at the most, on a year, or year and a half, it actually could enhance earnings in the banking sector because the endowment effect helps them, argues Biccard. As long as bad debts dont get out of control, which they shouldnt on a moderate increase on the interest rate. So to me the banks look quite a defensive to be, on quite low valuations.

Reuters - June 28 2006

Commodities set to attract more investors



LONDON: Commodities are expected to attract a growing range of investors over the next five years, but careful selection and more actively managed portfolios will be the key to making money, fund managers said.

Last month, many raw materials notched up their highest prices in several decades, if not their stron- gest ever, causing many to liken the bull run to the technology stocks bubble.

A panel of fund managers gathered in London for a seminar on asset management developments organised by the International Fund Investment said there were still plenty of reasons why money will continue to flow into the sector.

They cited a weak US dollar, lack of investment in supply infrastructure, boo- ming demand from emerging economies and saw commodities as a proven hedge against falling equity markets.

Large institutional investors like pension funds should not be worried about recent big fluctuations in commodities prices, panelists said.

"It doesn't really matter if it (the commodity boom) is a long-term trend or a bubble as we are investing to match our liabilities that sometimes go out 60 years," said Charlie Metcalfe, deputy chief executive of Hermes, Britain's biggest private sector pension fund.

Hermes manages funds for British telecoms group BT and decided earlier this year to invest US$1 billion (US$1 = RM3.68 billion) into commodities.

"I think the 600,000 beneficiaries of the BT fund will look back in 20 to 30 years time and think that it was a sensible allocation to make."

Mark Shipman, a trader who invests via spread-betting and who has recently written a best-selling book on commodity investment, dismissed talk of a bubble developing in the asset class.

Using the Reuters/Jefferies CRB index as a barometer for commodities, he said this basket of 19 prices was up 75 per cent from its 2002 low, versus gains of 77 per cent for the FTSE and Nasdaq.

"Commodities haven't exhibited anything near the exponential growth of the Nasdaq," he said, referring to the dotcom bubble.

Omar Kodmani, senior executive officer of Permal, one of the world's largest funds using hedge funds as an investment vehicle, with US$25 billion under management, said the commodity bull run could have another 10 years to run.

But he said the rally was now entering a phase which required a much more actively managed and selective approach to investment, rather than just buying "commodities" and waiting for the returns to flow in. - Reuters

Mining Weekly - 28 June 2006

Copper edges up, eyes US Fed meeting for direction


Copper prices tiptoed up on Wednesday, a day after tumbling nearly 4 percent on data showing a global surplus in the first quarter of the year, but trade was cautious ahead of the US Federal Reserve's policy meeting.

By 0430 GMT, London Metal Exchange copper for delivery in three months was at $6 750 a ton, up $10 from the previous day's London close. The metal had traded between $6 700 and $$6 780 on electronic trading platform Select.

On Tuesday, copper ended down $260, or 3,7 percent, at $6 740 after the International Copper Study Group (ICSG) said world refined copper production exceeded consumption by 64 000 tons in the first quarter, against a deficit of 89 000 in the same year-ago period.

But Peter Richardson, chief metals economist at Deutsche Bank, said in a daily note that the ICSG had omitted inventory changes at the State Reserve Bureau, the body responsible for managing China's strategic copper reserves, in assessing Chinese consumption.

"If allowance was made for the large drawdowns in stocks in the first quarter of 2006, we estimate that the copper market balance is currently, on a seasonally adjusted basis, either balanced or in small deficit.

"Fundamentally, the copper market remains extremely tight as global exchange stocks are at historically very low levels and another large draw from LME inventories overnight (2 000 tons) exemplifies the delicate balance in the market," he said.

Furthermore, threats to supply would continue to limit any sharp decline in copper prices.

Unions at BHP Billiton's Escondida mine in Chile are pushing for a pay rise of up to 10 percent and improved health benefits, while striking workers at two Grupo Mexico's copper facilities in Mexico have forced the company to declare force majeure.

An LME dealer in Hong Kong said the market's focus was shifting to the US Federal Reserve's meeting later Wednesday and Thursday, putting resistance for copper at $7 200 and support at $6 500.

Analysts expected a quarter of a percentage point rise in U.S interest rates to 5,25 percent and would scan the post-meeting statement for clues to the pace of future policy tightening.

If the Fed hikes rates more than expected, it may slow economic growth and crimp demand for industrial metals.

Gold Rises in Asian Trading as Higher Oil Prices Spark Inflation Concern

June 29 (Bloomberg) -- Gold rose in Asia on speculation oil's rise to near a three-week high will boost the precious metal's appeal as a hedge against inflation.

Bullion reached a 26-year high last month as record oil prices in April triggered higher gasoline costs. Crude supplies fell last week more than twice as much as forecast in a Bloomberg News survey, an Energy Department report showed.

``When you get the oil price in the ballpark where it is now, it tends to bring out people's fears about inflation,'' Gavin Wendt, a resources analyst at Fat Prophets Ltd. said from Sydney. ``Over the next couple of months we'll be into the peak demand period for oil and gasoline in the U.S. The direct beneficiary of this is going to be gold.''

Gold for immediate delivery rose as much as $2.57, or 0.4 percent, to $582.72 an ounce. It traded at $582.05 as of 11:30 a.m. in Tokyo. Gold for delivery in August gained 0.6 percent to $584.30 an ounce on the Comex division of the New York Mercantile Exchange as of 11:28 a.m. in Singapore.

Some investors buy gold to hedge against higher energy prices, and also against inflation, which erodes the value of fixed-income assets such as bonds.

Crude oil for August delivery rose as much as 50 cents, or 0.7 percent, to $72.69 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

(AFX UK Focus) 2006-06-29 04:33 GMT:

China May iron ore imports from Australia hit 9.27 mln tons


BEIJING (XFN-ASIA) - China's iron ore imports from Australia last month well exceeded all other suppliers at 9.27 mln tons, representing around 38 pct of China's total imports, the Steel Business Briefing reported, citing a customs official.

This is up by around 0.25 mln tons month-on-month and 0.60 mln tons year-on-year, the briefing said.

China's May iron ore imports sourced from India amounted to 6.01 mln tons, representing around 24.5 pct of its total imports, compared to 6.43 mln tons the month earlier.

Brazil's market share dropped to 4.85 mln tons or 19.8 pct in May, from 6.58 mln or 24.1 pct in April.

China imported a total of 24.57 mln tons of iron ore in May, up by around 2.82 mln tons or 13 pct year-on-year, local media previously reported.

Earlier this month, Baosteel, China's designated iron ore price negotiator and the country's largest mill, finally accepted a 19 pct price hike for imported iron ore this contract year from leading miners in Australia and Brazil.

Thu Jun 29, 2006 7:32 AM BST163

Chinese copper plant's July start delayed to 2007
By Polly Yam

HONG KONG, June 29 (Reuters) - A new 200,000-tonne-a-year Chinese copper smelter expected to be up and running in July will miss the target date, industry officials said on Thursday.

An official for Fambros Group, which is also known as Shandong Fengxiang Group, said in April the plant could begin production in July this year.

But now the start-up is expected between May and June 2007, said an executive for Xiangguang Copper Co. Ltd., a Fambros subsidiary that will operate the plant. He gave no reason for the delay.

Xiangguang is a newcomer in China's copper industry and has approval from Beijing to build the plant, which is intended to have an annual capacity of 400,000 tonnes.

It was trying to bring in Norddeutsche Affinerie (NAFG.DE: Quote, Profile, Research), Europe's largest copper producer, to joinly operate the plant in the Shandong province but talks between the two parties ended without success earlier this year.

An industry official who recently visited the plant site said Xiangguang had nearly finished the refining system at the plant but would take months to complete the flash furnace, used to smelt raw material concentrate.

The plant could use about 140,000 tonnes of concentrate this year if it began production in July, according to traders' estimate.

Traders said Xiangguang's delay was adding to concentrate supply because its suppliers were reselling its contracted cargoes to other Chinese smelters, driving up processing fees.

Overseas suppliers were offering the fees of more than $80 a tonne for treating and 8 cents a pound for refining their spot concentrate, up from $60 to $70 and 6 cents to 7 cents in early June.

But China Smelters Purchase Team, which is made up China's eight largest copper smelters, is demanding $100 and 10 cents. The smelters buy about 80 percent of China's imported concentrate to jointly import spot concentrate.

"By July to August, we will adjust our output if the fees do not meet that level," a team official said of production cuts.

The team was asking Beijing not to issue import permits to its members for spot concentrates that were concluded at fees below that level, after July 10.

The fees are an important source of revenue for smelters such as Jiangxi Copper Co. Ltd, China's largest maker.

Source: MarketWatch - 29 June 2006

Gold surges as dollar falls on Fed statement


Gold futures climbed back above $600 an ounce in electronic trade Thursday, after the Federal Reserve raised interest rates by a quarter percentage point as expected and came across as less hawkish than anticipated, sending the dollar sharply lower

Gold for August delivery touched a high of $602.90 an ounce in late afternoon trade, breaking through $600 for the first time since June. Earlier, it had closed official trade up $7.90 at $588.90 on the New York Mercantile Exchange.

Other metals prices were mixed. July silver closed up 17.8 cents at $10.333 an ounce, July platinum closed up $27.50 at $1,205.7 an ounce and September palladium ended up 60 cents at $313.40 an ounce. July copper edged up 13 cents at $3.423 a pound.
Fed less hawkish than expected

The Federal Open Market Committee raised interest rates by 25 basis points to 5.25%, the highest level since March 2001. "Some inflation risks remain," the committee said in a statement, which analysts viewed as less hawkish than expected.

"The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information," the committee said.

"The quarter-point interest rate raise by the Fed and its softer-tone policy statement have removed any fears that gold would be strangled by sharply higher interest rates and the U.S. dollar," said Peter Grandich, editor of The Grandich Letter.

A more aggressive move, "would be bearish for the price of gold," said Amaury Conti, equity trader at Austin Calvert-Flavin. "The Fed is still looking at a lot of data and people will continue to discuss what the Fed will do over the next couple of weeks."

For now, "$600 may be the top of the trading range," Conti said, adding that the positive trends in metals of the last few days will most likely continue given rising oil prices and the weakness of the dollar.

The dollar plunged to one-week lows against the euro and yen right after the Federal Reserve decision, prompting speculations by analysts about a possible surge in gold prices.

With Tuesday's $599 price now breached, "there's a decent chance that the rally can continue right up to major resistance at 609.40, which is the 100-day moving average," said Dale F. Doelling, chief market technician at Trends In Commodities.

However, "if gold is going to test that resistance level, it will take some serious fund buying along with continued dollar weakness, which just hasn't been evident of late."

In another development that strengthened gold, crude oil futures hit a three-week high above $73 a barrel Thursday after Energy Department data indicated the largest weekly drop in crude supplies since last November. The drop was attributed mostly to the shutdown of a key Louisiana channel and the resulting decline in production at four local refineries.

Crude for August delivery was last trading up $1.16, or 1.6%, at $73.35 a barrel.

On the supply side, gold inventories were unchanged at 8.03 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies fell by 68,563 troy ounces to 102.7 million and copper inventories were flat at 8, 174 short tons.

Source: Bloomberg - 29 June 2006

Copper jumps most in a month on supply concerns; nickel gains


Copper prices in London surged almost 6 percent, the most in a month, on speculation demand will outpace supplies in the second half of 2006. Zinc, nickel and aluminium also gained.

Inventories of copper monitored by the London Metal Exchange have tumbled 16 percent this month. Supplies of copper, used in plumbing and wiring, will fall short of demand by 200,000 metric tons this year, Mitsui Bussan Commodities, a unit of Japan's second-largest trading company, said yesterday.

"The market is coming back to the view that supply is tight," said Peter Hickson, a strategist at UBS AG in London.

Copper for delivery in three months jumped $400, or 5.8 percent, to $7,300 a metric ton on the LME, the biggest percentage gain since May 23. Prices reached a record $8,800 a ton on May 11.

A gain above $7,200 a ton triggered more buying by investors who follow price charts, said Michael Skinner, a London-based analyst at Standard Bank London Ltd. Purchases by funds also boosted prices, said Scott Meyers, a New York-based trader at Man Financial Ltd.

Copper closed at $6,709 on June 22, down 24 percent from the mid-May record on concern higher global interest rates intended to combat inflation will slow economic growth and curb demand for commodities.

Nickel prices rose $350, or 1.7 percent, to $20,750 a ton. Prices have climbed 41 percent from a year ago.

"There's no question that fundamentals are looking pretty attractive," said Tony Warwick-Ching, an analyst at CRU International, a London-based consulting company. "The markets are still saluting that."
Nickel inventories

Inventories plunged 70 percent this year to 10,548 tons, equal to less than three days of global use. Demand will exceed output by 15,000 tons in 2006, Credit Suisse Group said earlier this month. Nickel is used to make stainless steel rustproof and malleable.

Stainless-steel production is soaring in Asia on demand for the metal used in construction, kitchen appliances and cutlery. Global stainless-steel output will rise 8.9 percent to 26.4 million tons this year, led by a 10 percent gain in Asia, the International Stainless Steel Forum said June 19.

Aluminium gained $72, or 2.9 percent, to $2,555 a ton. Zinc climbed $155, or 5.3 percent, to $3,100 a ton.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery surged 13.4 cents, or 4.2 percent, to $3.305 a pound. Prices have more than doubled in the past year.

The Business - 02 July 2006 - Jonathan Fenby


Iron ore proving a pig of a dilemma for China to solve

When a booming enterprise finds itself paying a 71% increase to its main suppliers, it is likely to re-examine its purchasing strategy. However great its demand and however buoyant its sales, it is bound to take steps to try to reduce its input costs.

In this case, the enterprise is China and the suppliers the iron ore producers of Australia and Brazil. Though China usually seems to be sweeping all before it, commodities such as ore face it with a knotty problem, with implications for world markets as a whole.

In the case of oil and gas, Chinas strategy is to develop new supply links with West Africa, Venezuela and Sudan as well as Iran. This involves working with governments of which Washington, in particular, disapproves, but that is not going to deter Beijing. In another major area of commodity purchases, metals, Chinese demand has been a powerful factor in booming prices, such as the 60% jump in copper since the end of 2005.

Though some analysts see metals prices falling, last weeks purchase by Americas Phelps Dodge group of two Canadian nickel firms, Inco and Falconbridge, points in the opposite direction while Shanghai contracts for autumn deliveries of aluminium have been rising. Australias Bureau of Agriculture and Resources Economics has just doubled its forecast for the growth in its metals exports over the next 12 months.

As with its oil strategy, Beijing wants to strengthen links with mining nations. Chinese authorities laid on a lavish reception for Robert Mugabe when he visited China, and Australias John Howard visited last week, though he brought with him an unwelcome call by his countrys gas exporters for a substantial increases in the price they receive. But the problems China faces have been well illustrated by its failed attempt to check the rise in iron ore following a 71.5% price increase in 2005.

The huge expansion of Chinas steel industry means it takes nearly half the ore exported from the main producing countries. Though over-supply of domestic steel looms after the breakneck building of new mills, the reaction has been a familiar one on the mainland price wars in a Darwinian struggle between companies to survive and emerge on top.

After China sought to limit the ore price increase in 2006 to 10%, talks became deadlocked, the supply outlook clouded by port bottlenecks and cyclones in Australia. Then the major Brazilian ore group, CVRD, made a sideways move, reaching agreement with a German steel maker, ThyssenKrupp, for an increase of 19% in the main ore categories. This was accepted by the other European firms and by the Japanese, leaving China isolated, and obliging it to go along if it wanted assured supplies.

Nineteen per cent is a long way from 71.5%, but the experience has taught Beijing a lesson in international trade negotiations. In politics, it can stand out for what it wants, backed by its permanent seat on the Security Council and the desire of countries around the world to profit from its growth. But, when it is the suitor, in a commodity which it badly needs to sustain that growth, a more sophisticated approach is required.

When talks on the 2007 ore price start around November, Beijing is likely to try to drive a price wedge between the three major producers by insisting that higher transport costs mean it should pay less for Brazilian ore. China is also seeking to reach agreements with smaller ore producers, particularly in Australia. Recent government moves to slow down the pace of fixed asset investment could reduce demand for the steel for construction and infrastructure projects.

China is caught in a trap of its own making. It requires commodities to continue the growth which the regime needs, even if President Hu Jintao and his colleagues aim to cut annual growth from 10% to 7.5% by 2010. But the huge new input to world demand, coming after years of reduced capacity and under-investment by producers, faces it with spiralling prices that it is loathe to pay. As well as feeling that it is being exploited by cartels of producers, the government is also increasingly concerned about high input prices fuelling inflation.

How the mainland reacts will help to determine whether the commodity boom continues, and mining stocks remain star performers. China can only hope that major mining and energy companies will expand capacity and fast. Otherwise its steel industry, in particular, could be heading for the worst of all worlds high-priced over-capacity, leading to dumping on world markets, with all the effect that would have on manufacturers elsewhere.

Jul 02, 2006 (The Australian Financial Review - ABIX via COMTEX) -- The global commodities market appears to have recovered from a recent correction. Macquarie Bank group commodity analysts claim evidence suggests the correction was caused by a "broad-brush pulling out" by investors, as opposed to a measurable change in fundamentals. Gold prices surged $US27 to $US615 an ounce in New York on 30 June 2006, the greatest rise since before the 11 September 2001 terrorist attacks in the US. Meanwhile, crude oil prices have rallied back to $US74 per barrel and copper prices have risen by about 11 per cent over the past two trading sessions.

Source: Dow Jones - 3 July 2006

Copper, metals weaken in day of thin trading: LME

London Metal Exchange three-month copper fell Monday but price weakness was the result of a day of thin, illiquid trade rather than any other bearish influences, market participants said Monday.

The fresh fund money anticipated to come to market Monday to correspond with the beginning of the month didn't materialize and, instead, prices drifted lower, traders said.

The July 4 Independence Day holiday Tuesday, and the absence of much of the U.S. market contributed to muted trading, traders and analysts said.

Copper settled at $7,270 a metric ton at the afternoon kerb, down $49 on previous PM kerb prices. Moves back to $7,200/ton picked up good support but rallies to $7,470/ton were capped by pockets of selling, Triland Metals Ltd. said.

Aluminium pushed to an intraday high of $2,638/ton in early morning trade though fell alongside copper in the afternoon. Prices finished the late kerb $20 down on previous kerb prices at $2,605/ton.

Nickel, along with tin, were the only base metals to close the session in positive territory. Nickel gained $425 on the day, to close at $21,775/ton, supported by LME warehouse stock declines and a high percentage of cancelled warrants. Cancelled warrants comprise 30% of total nickel stocks in LME warehouses, Triland Metals said.

Zinc, like aluminium, had a strong start to the session, breaching the 50-day moving-average at $3,315/ton before reversing in line with copper. Prices ended late kerb in London down $25 on the previous kerb at $3,195/ton.

The wild bull trips but does not fall

Jul 03, 2006 (The Australian Financial Review - ABIX via COMTEX) -- Global commodity markets are expected to remain strong at least until 2010, despite a recent tumble. Gold, copper, zinc and nickel were all trading at record levels in mid-May 2006, but fears of interest rate rises in the US and elsewhere caused a sudden shattering of prices. Most commodities finished the financial year trading about 25% below their May peak. However analysts concur that the price fall was an inevitable correction following excessive speculative buying. The underlying demand for commodities, particularly from China, is expected to persist for several years, keeping prices above historical levels.

Publication Date: 4 July 2006

July 5 (Bloomberg)

Commodity Prices to Stay Above Historic Averages


Commodity prices are unlikely to drop back to their historic averages because of the influx of money from investment funds, JPMorgan Chase & Co. said.

The ``boom-bust'' scenario ``is not dead, but the old mean- reversion levels are,'' John Normand, global currency and fixed income strategist, said at the Commodity Investment Summit in London today.

The commodities bull market is in its fifth year, with oil, copper and zinc advancing to records in 2006. Hedge funds, banks and other institutions, with between $90 billion and $130 billion invested globally in commodities, have had a greater impact on prices than demand for the underlying raw materials from China, India and other emerging markets, Normand said.

Crude oil touched a record $75.40 a barrel today in New York. It has averaged $67.24 so far this year, compared with $22 a barrel in the five years to 2002. Copper futures were at a record $8,800 a metric ton on May 11. The metal averaged $1,788 in the five years to 2002.

``There has been an arrival of new players'' in the past few years, Normand said. ``These financial players matter more. The structural flows into commodities have much further to run.''

Pension funds, with $7 trillion in total assets, have at least $21 billion directly invested in commodities. Of the $170 billion of endowment assets, $5 billion is invested in commodities, according to the New York-based bank.

Between 1970 and 2000, rallies in commodities markets lasted about three years, with prices rising 45 percent, Normand said. Slumps would last the same period of time, with prices falling 42 percent. The current rally in prices has lasted 51 months with prices rising 171 percent, he said.

``Demand shocks have been prevalent in all commodities while supply shocks have only affected prices for gold and refined oil,'' Normand said.

About $40 billion is invested in commodity funds by individuals this year, up from $1 billion in 2003. That compares with $10 billion in mining and energy equity funds, according to the bank.

Of the $100 billion that so-called macro hedge funds have under management, $10 billion is in commodity futures. Bank commodity holdings are about $15 billion, according to JPMorgan.

Such investment flows will continue over the next five years, Normand said.

LONDON - (Reuters) - Thu Jul 6 2006 - 7:16 PM - By Nick Trevethan

Copper storms 6.5 pct higher, nickel at new peak


Base metals rose sharply on Thursday, copper by as much as 6.5 percent and nickel hitting a new record peak as funds returned to the market, dealers said.

"Wednesday saw the funds selling but today they are back buying. It is all about the weight of money," a base metals dealer said.

"We see markets heading higher, but investors will be more cautious than at the start of the year. The funds are more risk averse than they were before May when prices peaked so I don't see a repeat of the rush of money that carried us to the highs."

London Metal Exchange (LME) copper futures for delivery in three months were $480 higher at the close at $7,850 a tonne. In electronic trade copper peaked at $7,870, moving towards the May 11 record $8,800 peak.

"I think there are certain investors out there who are determined to see prices higher today. Nickel has been performing well over the last few days which is bullish," Sempra Metals economist John Kemp said.

Nickel was $23,545 a tonne at the close, up from $22,750 at Wednesday's close and just below an earlier record high of $23,600.

"We are entering a period of higher prices, but people have been reluctant to buy," Chris Eibl, head of trading at Tiberius Asset Management, said.

"The trend is moving faster and faster to the upside. People will try to jump on and will chase prices higher. We are overweight in copper, nickel and zinc and we are not changing."

Zinc was $140 higher at $3,390 and aluminium closed at $2,600 a tonne, bouncing 4.8 percent after losing nearly 3 percent on Wednesday, to end at $2,480.

"Aluminium recovered after some Japanese buying early on. The fall in LME stocks also reignited buying and it looks like $2,500 is the floor," UBS analyst Robin Bhar said.

Stocks of aluminium, prized for its light weight and corrosion resistance, dropped 6,475 tonnes overnight to 764,300.

LONDON (Dow Jones) - LME Review:
Thursday, July 6, 2006 4:53:04 PM

Metals Surge As Fresh Fund Allocations Flow


London Metal Exchange three-month copper surged 6.6%
Thursday, reversing days of lackluster trading as the fresh fund allocations
predicted for the beginning of the new quarter finally began to flow, traders
and analysts said.

Copper spent the morning trading within a relatively thin $150 metric ton
band before fund buying gathered momentum in the afternoon, pushing prices to a
fresh intra-day high of $7,885/ton just prior to late kerb. Copper finished
late kerb just shy of those levels at $7,850/ton, up $485, or 6.6% on previous
kerb levels.

"I think finally we're beginning to see the new money coming in," said one
trader, referring to earlier predictions of an influx of fresh fund money timed
to correspond with the start of the month and quarter."It got off to a quiet
start but I think now there are hints now of it coming in," he said.

The remainder of the metals followed copper higher, with LME three-month
nickel pushing to a fresh contract highs and zinc recording the steepest
intra-day gains after copper.

Nickel topped yesterday's contract high Thursday with a close at a fresh
record of $23,545/ton, up 3.5% on previous PM kerb levels. Prices are supported
by a huge backwardation, traders said, which attracted the first "much needed"
stocks into LME warehouses Thursday after months of ongoing stock declines.

"The nickel market is very tight and it's going up which has really been the
trigger for them all to come up today," another trader said.

Zinc jumped 4.1%, or $135 to $3,385/ton at PM kerb. Sentiment for the metal
has been bolstered by consecutive days of drawdowns in material from LME
warehouses, traders said. Stocks fell another 225 tons to 212,550 tons,
Thursday.

Source: Mining Journal - 6 July 2006

Bloomsbury Minerals Economics: copper deficit


Research company Bloomsbury Minerals Economics calculates that a copper-in-concentrates stock drawdown of 260,000 t is underway, the severity of which is reflected in the fall in spot concentrate treatment and refining charges so far this year.

Bloomsbury calculates an increase in blister/anode/nascent cathode stocks of 50,000 t, but that is additional material in process in tank-houses, and is an integral part of industry growth, not an indication of commercial surplus.

Bloomsbury further calculates a refined production-consumption deficit of 190,000 t.

The mine-to-consumer deficit (the sum of the above three items) Bloomsbury calculates as 400,000 for the year as a whole.

Dow Jones Newswires - 6 Jul 2006 22:27 GMT

Chile Escondida Copper Miners Launch Work Slowdown


SANTIAGO -(Dow Jones)- Unionized workers at Chilean mining company Minera Escondida Ltda. have launched a work slowdown to protest the company's Wednesday contract offer, a union leader said Thursday.

"We've gone into a 'Total Safety'" mode, which means we're respecting every security procedure," Marin said, explaining that this slows down the mining process.

The union leader said the slowdown could cut output by 10% at most.

But Alejandra Wood, external affairs manager at BHP Billiton (BHP) in Chile, said that output hasn't been affected. The Anglo-Australian mining giant is Escondida's controlling and operating shareholder.

On Wednesday, Escondida offered its unionized workers a 1.5% wage increase. The union had demanded a 13% pay raise in light of soaring copper prices.

Contract negotiations are scheduled to begin next week, and the union expects to vote on the mine's final offer July 28.

Marin said the union isn't ruling out other forms of protest, such as "square wheels," in which miners drive the trucks carrying mined mineral to the crushers at the slowest pace possible.

In addition, the workers say they are willing to walk off the job next month when their contract expires if negotiations stall.

Escondida offered the workers the same wage increase they offered in their previous contract negotiations in 2003, when copper prices averaged $0.66 a pound.

But with copper prices averaging $1.67 a pound last year and $2.75 in January-June, the sole union at Escondida is seeking the 13% pay increase and a CLP16 million ($29,299) bonus per person.

The union, which represents 2,055 miners - 97% of union-eligible workers at the mine - says that the city of Antofagasta is the second most expensive in the country and that their wages must be adjusted accordingly.

The union has said that the bonus it is seeking represents 5.4% of Escondida's first-quarter profit.

The miners' contracts expires Aug. 2, the date a strike could legally start.

Escondida is the world's largest privately owned copper mine. It produced 1,271,472 metric tons of copper last year, as well as 182,472 ounces of gold.

BHP Billiton owns 57.5% of the mine, with Anglo-Australian company Rio Tinto PLC (RTP) holding 30%, a Mitsubishi-led Japanese consortium 10%, and International Finance Corp 2.5%.

Company Web site: http://www.escondida.cl

July 7 (Bloomberg)

Nickel Prices Rise for Eighth Straight Session After Inventories Dwindle


Nickel prices in London rose for the eighth session in a row as inventories of the metal used to make stainless steel dwindled to the lowest since September.

Stockpiles of nickel monitored by the London Metal Exchange have declined for five consecutive months. They fell 2.1 percent today to 9,378 metric tons. Global stainless-steel production rose 12 percent in the first quarter from the fourth quarter, the International Stainless Steel Forum said yesterday.

Nickel is ``in the happy position of seeing the stainless- steel industry growing rapidly,'' said Tony Warwick-Ching, an analyst at CRU International, a London-based consulting company. ``It looks pretty robust.''

Nickel for delivery in three months surged $450, or 1.9 percent, to $24,000 a ton at 4:16 p.m. on the LME. Prices earlier reached $24,100 a ton, the highest since at least 1987. The metal climbed 19 percent in the previous seven sessions and is up 65 percent from a year ago.

Inco Ltd., the world's second-biggest nickel producer, said the opening of its Goro mine on the Pacific Island of New Caledonia probably will be delayed beyond the target of the 2007 fourth quarter.

Stainless-steel makers and other nickel consumers are relying on projects such as Goro to increase supplies. Nickel consumption will exceed production by 15,000 metric tons in 2006, Credit Suisse said in a report last month. That's a quarter of Goro's projected annual output.

Copper fell on concern that global interest rates will rise, curbing demand for the metal used in construction and autos.

``Central banks in Europe, the U.S. and Japan will continue raising interest rates until the first quarter of 2007, said Jon Bergtheil, head of global metals strategy at JPMorgan Securities Ltd. in London. ``That would hurt demand for metals.''

Copper fell $85, or 1.1 percent, to $7,765 a ton on the LME. Prices still have gained 6 percent this week and 77 percent this year.

Copper for September delivery dropped 6.2 cents, or 1.7 percent, to $3.555 a pound on the Comex division of the New York Mercantile Exchange. Prices were up 6 percent for the week, after gaining 6.5 percent in the previous week.

Stockpiles monitored by the LME dropped 2.2 percent today to 89,600 tons, the lowest since Dec. 30.

LONDON (AFP) - 10 July 2006

The price of nickel reached a pinnacle of 24,500 dollars per tonne during trading -- the highest point since the base metal was first listed in 1979.

Since last Wednesday, the base metal has been breaking records on a daily basis, on the back of soaring investment fund demand and falling global stocks.

On the London Metal Exchange (LME), three-month nickel prices stood at 24,350 dollars per tonne at around 1400 GMT on Monday.

"The downtrend in LME nickel stocks continues to provide firm support to prices," said Barclays Capital analyst Ingrid Sternby.

The price of nickel, a metal used to help prevent corrosion, has surged by almost 82 percent since the start of 2006 -- rising in line with other metals amid tight supplies and keen demand.

DOW JONES NEWSWIRES - 10 July 2006

A tight-supply situation that could be exacerbated by a potential strike
against Chile's Escondido enabled Comex copper futures to bounce back from
early weakness to post a gain on Monday, traders and analysts said.

The most-active September copper contract rose 3.50 cents to settle at
$3.5825 per pound on the Comex division of the New York Mercantile Exchange.

They had traded down to $3.4800 overnight and $3.4900 in early pit-session
activity.

"It was fairly obvious why we were down in the morning," said Dan Vaught,
futures analyst with A.G. Edwards. "We had the dollar up fairly significantly,
and the energy markets were under some pressure, as were the precious metals.
Also, you had fairly significant additions to LME (London Metal Exchange)
copper stockpiles."

The September futures later got as high as $3.5900 in open-outcry activity,
nearly matching the overnight high of $3.5950 before prices had turned south.
The recovery occurred even though the dollar extended its gains, the energy
market weakened further and precious metals were only able to bounce from their
lows slightly.

"I would suspect that bulls are buying here because they are not optimistic
about the chances for a settlement of the Escondida labor situation without
having labor resort to a strike at some point," said Vaught.

A contract with union workers expires Aug. 2, and offers so far suggest some
distance between the two sides. The union has sought a 13% pay raise, while the
company has offered 1.5%. Late last week, a union official said that workers
had begun a work slowdown to protest the company's latest contract offer.

"There may be some technical buying in here as well," added Vaught.

Stephen Platt, analyst with Archer Financial Services, commented that renewed
speculative buying appeared to come back into the market.

Mike Zarembski, future analyst with XPRESSTRADE, added that buying returned
on ideas that the overall fundamental picture remains constructive.

"Traders looked at that little bit of a sell-off this morning as a chance to
buy it and push it higher," said Zarembski.

Vaught put initial support for September copper around the $3.55 area, then
the low for the day of $3.48. He put initial resistance around the $3.62 area,
after the September futures peaked at $3.6195 on Friday.

"We have not been able to sustain a push back above $3.60," he commented. "So
that's your first line of significant resistance."

Source: Dow Jones - 10 July 2006

Metals consolidate in rangebound trading: LME


London Metal Exchange three-month copper prices Monday finished a rangebound session slightly higher than previous late kerb levels indicating prices are within a "consolidation" phase, market participants said.

Copper closed up $20 from Friday's PM kerb at $7,750 a metric ton on a day when prices moved within a $260 ton range of $78,585-$7,845/ton.

Nickel finished the session at a fresh record high kerb close of $24,650/ton, after earlier touching a fresh high of $24,800/ton. Prices face resistance at $25,000/ton and again at $30,000/ton, traders said. Critically low stocks, strong demand and a widening backwardation have conspired to push nickel prices to fresh highs for three consecutive sessions.

Aluminium failed to mount resistance at $2,600/ton, instead slipping back from an intraday high of $2,585/ton to $2,565/ton at late kerb, down just $12 on the previous PM kerb.

Relatively strong intraday gains were recorded in zinc and lead which firmed 1.7% and 3.8%, respectively. Zinc ended late kerb in London up $60 on the previous kerb at $3,500/ton. Lead was up $39 from the previous at $1,079/ton.

July 11 (Bloomberg)

Gold Rises to Five-Week High, Silver Gains on Concerns Over Iran, India


Gold prices rose to a five-week high in New York as the escalating dispute over Iran's nuclear research program and terrorist attacks in India spurred demand for precious metals as a haven. Silver surged 4.4 percent.

Gold reached a 26-year high of $732 an ounce on May 12 partly on concern Middle East oil exports might be disrupted should the U.S. move to block Iran's nuclear program. Iran's president today said the country won't back down ``one iota.'' As many as 142 people were killed in Mumbai, India's commercial hub, by seven blasts on trains and in commuter stations.

``Traders are looking to put money back into metals on geopolitical concerns,'' said John Licata, chief investment strategist for Blue Phoenix Inc., a precious-metals and energy firm in New York. ``Silver has been oversold in relation to other precious metals, and momentum traders are jumping back in.''

Gold futures for August delivery rose $17, or 2.7 percent, to $643.10 an ounce on the Comex division of the New York Mercantile Exchange. Prices reached $643.90, the highest since June 6.

Silver for immediate delivery jumped 49 cents to $11.58 at 2:20 p.m. New York time. The percentage gain was the biggest fluctuation of any commodity today. The metal has climbed 31 percent this year.

Gold rose as higher energy costs boosted the appeal of precious metals as a hedge against inflation. The precious metal is up 24 percent this year, and crude oil has gained 22 percent. Gold reached $873 an ounce in 1980 when oil costs doubled in a year and consumer prices rose to 12 percent.


``It's the inflationary pressure from oil that's driving gold'' said Marty McNeill, a trader at R.F. Lafferty Inc. in New York.

Oil reached $74.60 a barrel today. Prices climbed to a record $75.78 on July 7. Gold rose to a 26-year high of $732 an ounce on May 12.

``Gold is pretty routinely following the crude market recently,'' said Daniel Vaught, a commodity analyst at A.G. Edwards & Sons Inc. in St. Louis.

As many as 450 were injured in Mumbai. It was the worst terrorist attack in the city since 1993. The Lashkar-e-Taiba group, which seeks an end to Indian control of Jammu & Kashmir state, claimed responsibility, according to the CNN-IBN television channel. India put all its major cities on alert. The country is the biggest buyer of gold.

``It's more of a local issue,'' said Paul Walker, chief executive officer of London-based metals research firm GFMS Ltd. ``If it were to escalate, and there's an expectation that the rupee could fall, you could see some pre-emptive buying of gold.''

Gold may reach $700 by the end of the year, GFMS has said.

Silver, which has some industrial uses, also benefited from higher base-metal prices, some analysts said. Nickel in London rose for the 10th straight session, extending gains to at least a 19- year high. Copper rose to a one-month high.

Silver reached a 25-year high of $15.20 an ounce on May 11.

Silver's move is ``related to other markets,'' said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. ``It's running on the back of gold and base metals. People who are looking for the big pullback in silver got it, and now a base is forming. You're seeing fresh investor interest.''

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Source: Dow Jones - 11 July 2006

Buoyant on stocks, supply concern, oil hike: LME


London Metal Exchange prices were buoyant Tuesday, responding to supply concerns, falling stocks and rising oil prices boosting sentiment across commodity markets, traders and analysts said.

Strongest performer was LME three-month nickel, breaching the $25,000 a-metric-ton level for the first time and setting an all-time high of $25,700/ton, up 4.2% on the Monday PM kerb.

LME nickel stocks have been steadily declining since the start of the year from over 30,000 tons to 8,418 tons, down 486 tons on the day. Cancelled warrants, denoting material due to leave the warehouse soon, have risen to 50.23%, up from 46.23%, leaving nickel stocks close to critical levels.

The cash-to-three-month spread flared out to $2,450, curtailing short selling, a trader said.

While prices are seen as overblown and fueling substitution of other materials for nickel, its rally could extend further before consolidating, the trader said.

LME copper rose to a five-week high of $7,977.50/ton. Speculative buying following a small stock rise pushed prices up, said analyst Roy Carson at Triland.

A rise in oil prices in the afternoon following comments by Iran's chief negotiator predicting a long process on talks regarding the country's nuclear program boosted prices across commodity markets.

Copper will remain extremely sensitive to supply disruptions due to slow capacity growth, Goldman Sachs said in a report.

At the same time, the possible closure of Grupo Mexico SA's La Caridad mine, Escondida contract negotiations, and Codelco contract negotiations later in the year added to copper's bullish outlook, a trader said.

LME zinc was in bullish mood, charging to a one-month high of $3,570/ton, up $70 before trade selling pared gains.

DOW JONES NEWSWIRES - 11 July 2006


High-grade copper futures rose along with crude oil and other metals
Wednesday, although analysts noted that copper's own supply/demand fundamentals
also remain supportive. Speculative buying was reported.

The most-active September copper contract rose 5.25 cents to settle at
$3.6350 per pound on the Comex division of the New York Mercantile Exchange.

"It's basically following the general strength in the LME base metals more
than anything specific to copper," said Dave Rinehimer, director of futures
research at Citigroup Global Markets. "The energy markets are also higher.
We're getting a general rebound in commodity prices after the general weakness
of the last couple of sessions."

"All of the metals have been relatively strong," echoed a trader, citing
speculative buying. "And oil is up."

Nickel led the London Metal Exchange metals higher, and August gold was up
$14.20 an ounce as copper futures were closing. August crude had added 59 cents
to $74.20 a barrel, and the Continuous Commodity Index was up 2.80 points to
390.40.

Furthermore, said Rinehimer, copper's "supportive fundamentals remain in
play. Inventories are tight. Strikes continue in Mexico and there is the
potential for a strike at Escondida. And fund buyers returned to the market."

Escondida's contract with the union expires Aug. 2. The company has offered
unionized workers a 1.5% wage increase, while the union has asked for a 13%
hike. Escondida is considered the world's largest privately owned copper mine,
producing 1,271,472 metric tons of copper last year.

Meanwhile, strikes continue against Grupo Mexico, and the Mexican mining
giant has said that operations at the La Caridad complex could be shut down in
a couple of weeks if a strike persists. It began March 24 and the result of a
union leadership dispute. Workers also went on strike at the Cananea copper
mine on June 2.

Resistance for September copper can be expected around $3.76, said Rinehimer.
He put initial support around $3.50, then $3.42.

A key for the metal may be whether the market can generate any momentum after
poking above last week's five-week high of $3.6350.

"We've been in a bit of a recovery mode," said Rinehimer. Copper has been
upticking since dipping just below $3 a pound several times last month.

"We probably got a bit of a boost because we took out last week's high.
Clearing that probably activated buy stops at $3.6350. It's a question now of
what kind of follow-through we get."

September copper peaked at $3.6550, its strongest level since May 31. The
contract left a gap on an open-outcry-only chart between Monday's high of
$3.5900 and Tuesday's low of $3.6080.

Blimey!

Wed Jul 12, 2006

Copper climbs towards $8,000, at five-week high


SHANGHAI, July 12 (Reuters) - London Metal Exchange copper extended gains to hover just below $8,000 a tonne on Wednesday, supported by strong fundamentals and steep gains to an all-time high in nickel prices the previous day.

By 0424 GMT, LME copper for delivery in three months was up $50 at $7,950 a tonne. The red metal had earlier traded as high as $7,985, the highest since June 5.

"We expect copper prices to test the $8,000 level later today," said an LME dealer in Tokyo, adding that copper was supported by firmer sentiment in the commodities market with gold trading below a five-week high.

On Tuesday, copper closed up $170 or 2.2 percent at $7,900, while nickel touched a record peak of $25,700 before ending up $1,000 at $25,650 on dwindling stocks and strong demand from stainless steel mills, especially from China.

"Sometimes, a high nickel price hurts demand, but at this moment there is no indication on lower purchases as the inventory is still decreasing," said Peter Richardson, chief metals economist at Deutsche Bank.

Nickel stocks in LME warehouses fell another 486 tonnes on Tuesday to 8,418 tonnes, the lowest since August 2005, with the premium for cash nickel over the three-months price widening to $1,900. On May 11, the premium was $475.

On the supply side, the union at Chile's Escondida, the world's biggest copper mine, said on Tuesday there had been no progress in talks with the company to negotiate a new contract to replace one that expires in early August.

Mine workers are labouring at a slower-than-usual pace in hopes of spurring along the talks, a union representative told Reuters, but BHP Billiton, which controls the mine, said production has not been affected.

The most active copper contract in Shanghai, September, ended the morning session up 1,540 yuan at 72,980 yuan ($9,133) a tonne, supported by gains in LME copper.

"Traders have been arbitraging as they believed Chinese prices would chase LME prices in near futures," said Yang Jun, an analyst at Dalian Northern Futures.

Shanghai spot copper prices were between 65,200 and 65,600 yuan, up 475 yuan from the previous day.

Source: (Dow Jones - 12 July 2006

Base metals supply constraints underpin markets Goldman


Base metals markets are several years behind the oil market in terms of supply capacity growth, with this underpinning prices going forward, according to U.S. investment bank Goldman Sachs (GS) in a report issued late Monday.

Investment in non-energy mining has just begun to rise but this increased spending is yet to be felt, "leaving base metals supply capacity constrained and struggling to keep pace with demand growth," Goldman Sachs said.

With inventories across most of the base metals complex already at "exceptionally low levels," the inability to increase supply in the near term has left the market dependent on price spikes to force demand down in line with supply, the report added.

"The general inflexibility in supply has also left the market extremely sensitive to news flow, particularly related to the economic growth outlook and near-term supply disruptions, given the very limited ability to deal with fundamental shocks," Goldman Sachs said.

"As a result, spot price and timespread volatility has surged across most of the base metals, with the recent volatility in base metals reaching the extreme volatility of the oil market back when its constraints were binding," it added.

This situation has generated "explosive returns" in base metals, up 46% over the first half of 2006, the report said.

Going forward, Goldman Sachs said it believes similar dynamics will drive base metals returns over the next year.

"Supply capacity is expected to remain constrained in the near to medium term, exacerbated by ongoing labor disruptions and technical difficulties," Goldman Sachs said.

"Thus, barring a major deterioration in the economic growth outlook, we believe inventories will likely remain tight over the next 12 months, keeping both prices and volatility at historically high levels that will continue to support strong base metals returns," Goldman Sachs added.

Certainly the area to be in at the moment IMHO.

July 13 (Bloomberg)

Copper Declines in London, Shanghai as Charts Give Sell Signals


Copper prices in London and Shanghai fell as the charts that some traders use to predict prices gave sell signals.

The ten-day relative strength index for London copper prices rose to 70 yesterday, the highest in almost a month, while the index in Shanghai climbed to 75, the highest since May 17. Readings above 70 indicate prices may be poised to fall.

``Many investors and speculators were expecting London prices to rise above $8,000 and had placed selling orders at that level. So they are taking some profits,'' Wang Zheng, an analyst at Shanghai Dalu Futures Co., said by phone today.

Copper for three-month delivery fell as much as $140, or 1.7 percent, to $7,900 a metric ton on the London Metal Exchange. It traded at $8,000 at 9:39 a.m. Singapore time.

The metal rose to a six-week high of $8,210 yesterday after a union leader at Chile's Escondida, the world's biggest copper mine, said output fell after workers followed safety procedures to the letter amid a wage dispute.

Metal for delivery in September fell as much as 1,730 yuan, or 2.4 percent, to 71,300 yuan (8,920) a metric ton on the Shanghai Futures Exchange. It traded at 72,410 yuan at 9:42 a.m. local time.

The union's ``go-slow'' approach, such as driving trucks more slowly and refusing to use vehicles that need repairs, is having ``no impact on final copper output,'' BHP Billiton spokesman Illtud Harri said yesterday.

The company owns 57.5 percent of Escondida, which accounted for 8.5 percent of global output from mines last year, based on its production figures and an estimate for global copper output by the Chilean Copper Commission, a state-run research group.

``News about strikes has been in the market for a while now, and we need more bullish news to push copper prices higher,'' said Wang.

Mining Weekly - 13 July 2006

Copper breaks $8 000, at six-week high


London Metal Exchange copper broke $8 000 a ton on Wednesday for the first time in more than a month as investors came back to the market.

The rise was a return to the upward trend after the correction in May and June, a Geneva-based commodities fund manager said.

"I'm not surprised. Nothing has really changed. There was panic in May and June when investors sold risky assets like emerging markets and commodities...now people are coming back," the manager said.

A slight rise in the dollar after the release of US trade deficit data failed knock copper, which was quoted at $8 100/8 120 per ton at 1244 GMT, up almost three percent from Tuesday's closing price.

Nickel touched a record peak of $26 550 on Wednesday, and hovered $50 below this at 1246 GMT, supported by dwindling stocks and strong demand from stainless steel mills, especially in China.

"Nickel is worsening every day," the fund manager said, referring to falling stocks in LME-registered warehouses.

"Sometimes, a high nickel price hurts demand, but at this moment there is no indication of lower purchases as the inventory is still decreasing," said Peter Richardson, chief metals economist at Deutsche Bank.

Nickel stocks in LME warehouses fell by a further 174 tons on Wednesday to 8 244 tons, the lowest since August 2005, and only a little more than two days of global use.

Nickel and copper miners were very much in demand.

Xstrata sweetened its hostile offer for Canadian metals miner Falconbridge on Tuesday, complicating a bidding war that includes a friendly offer from compatriot Inco backed by Phelps Dodge of the US Xstrata shares were up five percent in London by 1231 GMT, with mining stocks including Anglo American and Rio Tinto also outperforming the FTSEurofirst, a broad index of 300 stocks.

On the supply side, the union at Chile's Escondida, the world's biggest copper mine, said on Tuesday there had been no progress in talks with the company to negotiate a new contract to replace one that expires in early August.

Asia Pulse Data Source via COMTEX - July 13, 2006

Sharp rise in metal prices


Led by nickel, metal prices firmed up sharply on the non-ferrous metal market here today on good stockists demand in view of rise in the London Metal Exchange (LME).

Nickel rose by Rs 20 per kilo to Rs 1280 from Rs 1260 yesterday, followed by copper cable scrap by Rs 10 per kilo to Rs 390, copper scrap heavy to Rs 380, copper armeture to Rs 368, copper utesnils scrap to Rs 340, copper wire bar to Rs 418 and copper sheets cutting to Rs 360.

In LME, metal prices were buoyant responding to supply concerns, falling stocks and rising oil prices boosting sentiment across commodity markets.

Strongest performer was LME three-month nickel, breaching the $25,000 a-metric-ton level for the first time and setting an all-time high of $25,700/ton, up 4.2% on the Monday PM kerb.

LME copper rose to a five-week high of $7,977.50/ton.

LME zinc was in bullish mood, charging to a one-month high of $3,570/ton, up $70 before trade selling pared gains.

July 12 2006 - By Philip Coggan, FT Investment Editor

The Short View: Time to hop back on the bandwagon


Commodities have resumed their upwards march. Nickel touched a record high of $26,000 a tonne on Wednesday while copper bounced back over $8,000. Gold, partly bolstered by the Mumbai bombings and by renewed Middle East tensions, reached $650 an ounce. Mining stocks are leading the equity performance tables.

The bounce-back in commodity prices reflects greater investor confidence about the outlook for global growth, partly because the US Federal Reserve is expected to stop tightening and partly because economic data in Asia and Europe still look robust.

Demand from China is universally assumed to be the long-term driver for commodity prices. But has it been behind the recent revival? Graham Turner of GFC Economics points out that, while Chinese imports rose 18.9 per cent year-on-year in June, after seasonal adjustment, the first-half gain was just 4.9 per cent.

If one strips out rising prices, the statistics look even more remarkable. According to Turner, Chinese imports of iron ore fell 5.5 per cent in the six months to May while copper imports fell a remarkable 57.4 per cent, year-on-year, in real terms.

Those numbers are in stark contrast to the 10 per cent-plus GDP growth that China is expected to announce in the first half. Many outsiders are suspicious of the rather smooth upward progress displayed by Chinese GDP in recent years. Tatha Ghose of Dresdner Kleinwort has put together an alternative set of data, based on industry-specific statistics, which indicate that Chinese manufacturing and capital expenditure have slowed significantly in recent months.

That slowdown could have sparked the commodity sell-off in May and June. And if the commodity sell-off led to a general retreat in risky assets, then we have a new potential culprit for the market correction not the Federal Reserve, or the change in Japanese monetary policy, but a moderation in Chinese activity.

Dresdners indicators also suggest a rebound for Chinese activity is now in prospect. So the recent pick-up in commodity prices could be seen as confirmation of that change in trend. And, now that prices are moving higher, speculators have every incentive to jump on the bandwagon again.

LONDON, Jul 14, 2006 (XFN-ASIA via COMTEX)

Base metals were higher, led by copper, zinc and nickel, which continue to find support from dwindling stockpiles, labour disputes and production problems at key mines.

Analysts warned, however, that the escalating crisis in the Middle East could dampen sentiment if surging oil prices hurt economic growth and therefore base metal demand.

At 3.40 pm, LME copper for three-month delivery was at 8,070 usd a tonne, up from 7,920 at the close yesterday, while nickel was at 26,000 usd a tonne against 25,250.00 usd.

Other metals were also higher. Zinc was at 3,490 usd against 3,420 usd yesterday, tin was at 8,775 usd against 8,700 usd and aluminium was at 2,625 usd against 2,605.

Source: Dow Jones - 14 July 2006

Copper concentrates deficit to force smelter cuts-Analyst


The largest ever copper concentrates deficit is driving treatment and refining charges lower and will lead to smelter cutbacks in Asia, according to analyst Peter Hollands at Bloomsbury Minerals Economics.

In mid-June, China's eight largest copper smelting companies were reported to be planning a 10% cut in their cathode production in the second half of 2006, if TC/RCs didn't recover to a "reasonable level," Hollands said.

He noted talk that the Chinese Copper Smelter Purchase Team has requested the Ministry of Commerce not to issue import licenses for other concentrates contracts at TC/RCs below $100 a metric ton and 10 cents a pound.

A 290,000-metric-ton deficit is what has pushed spot TC/RCs from $140/ton and 14 cents a pound last December to $70/ton and 7 cents/lb in May, Hollands said. Then in June, aggressive merchant buying drove TC/RCs down to the $28-$40/ton and 2.8-4 cents/lb range, he noted.

"The Chinese were outraged and ceased buying, seeking at least $100/ton and 10 cents/lb. That steadied the market and smelters are now getting $85/ton and 8.5 cents/lb, spot," he added.

"That very firm position by the big eight Chinese smelters ended the episode of aggressive merchant buying for nearby and far-forward delivery from mines," Hollands noted.

And in negotiations for July 2006-June 2007 annual smelting contracts, a fierce battle is believed to be under way, Hollands said.

"One large producer is said to be trying greatly to cut or perhaps even (eventually) to eliminate the price participation clause in term contracts," Hollands said.

"The possibility exists of more single-year holidays being taken in these multi-year frame contracts. If any smelters concerned then cut production rather than buying spot, refined copper supply in Asia could be cut sharply, driving up Shanghai (and other) prices and Asian premiums sharply," he added.

Hollands said Bloomsbury expects a round of smelter cutbacks both from Chinese plants withdrawing from the spot market and other Asian smelters holidaying from term contracts.

In 2007, Bloomsbury sees the concentrates market in a 34,000-ton surplus, dropping to a 23,000 tons surplus in 2008.

July 14 (Bloomberg)

Copper Rises on Concern Output at World's Largest Mine May Drop


Copper rose in London, heading for a third straight weekly gain, amid concern that a pay dispute at the world's largest mine may lead to reduced production.

Miners at Escondida in Chile plan to strike next month if unions and management fail to reach a wage accord. Workers introduced ``go-slow'' tactics at the mine on July 7. Escondida accounted for 8.5 percent of global mine output last year, according to data from Chile and mine owner BHP Billiton.

``Copper's strong and likely to remain strong ahead of the Escondida contract,'' said William Adams, a Saffron Walden, England-based analyst at metals information company Basemetals.com.

Copper for delivery in three months on the London Metal Exchange rose $180, or 2.3 percent, to $8,100 a metric ton as of 10:20 a.m. local time. It has gained 4.6 percent this week.

Copper output has already been cut this year by strikes at mines in Mexico and faltering metal recoveries at mines in Zambia and Indonesia. Stockpiled copper, which consumers may use to fill a forecast production shortfall this year, has also slumped in the last month.

Inventory monitored by the LME gained 0.6 percent, the exchange said today, to 94,100 tons. Still, it has fallen 16 percent since June 1 and is now equal to about two days of global consumption.

``Any strike action would soon eat into the stock level,'' Adams said.

Among other LME metals, aluminum gained $30 to $2,635, lead rose $40 to $1,170, tin was $175 higher at $8,095 and zinc gained $110 to $3,530.

Nickel climbed $650 to $25,900 after inventories of the metal used to make stainless steel dropped the most since August 2004. Inventory monitored by the LME fell 14 percent, the exchange said today. Stockpiles have dropped 82 percent this year to 6,582 tons, the lowest level since May 18, 2005.

``Until we see any sustained turnaround in inventories, it's difficult to get bearish,'' said Neil Buxton at London- based GFMS Metals Consulting Ltd. The high prices ``are not choking off demand at all,'' he said.

Dow Jones Newswires - 14 Jul 2006

By Allen Sykora


Labor has been a major issue for the copper market so far in 2006 and could become an even bigger one in the weeks ahead, with the potential for a strike looming against Chile's Escondida, analysts say.

A long-running strike against Grupo Mexico (GMEXICO.MX) is continuing, and the apparent distance between the Escondida union and management contract offers has left the market expecting a strike by a roughly 60-40 margin, reported Robin Bahr, analyst with UBS. This comes at a time when global supplies are historically low.

"Labor issues are extremely significant and have been this year," Bahr said. "In the first four months of 2006, there was more disruptions and copper lost to the market than the whole of 2005, particularly with the long-running strike at Grupo Mexico, which remains unresolved."

"The thing that has fired up the imagination of bullish traders is the fact that the Escondida mine is the largest in the world," said Dan Vaught, futures analyst with A.G. Edwards.

Escondida produced 1,271,472 metric tons of copper a year ago. Total global refined production was roughly 16.433 million metric tons, according to a report earlier this year from the International Copper Study Group.

Thus, Escondida accounted for roughly 7% of the global market last year, making it the world's largest mine "by quite a margin," said Bahr.

And that, obviously, makes the labor situation at the mine crucial for the copper market. Even if a strike lasts for only one month, this would cost 100,000 tons of production, said Bahr.

"To put that into perspective, there is less than that in LME warehouses," he continued.

Data released by London Metal Exchange early Friday showed that warehouse inventories rose 525 metric tons to 94,100 metric tons. Comex stocks stood at 7,510 short tons Thursday.

"Between the major two exchanges, you've got the same amount (approximately in storage) as would be produced by Escondida in one month," said Bahr.

After copper prices hit record highs this spring, the union has sought a 13% raise, while the company offered 1.5%. A union official says it has begun a work slowdown and that a strike is "imminent."

The market is "anxious" as the countdown toward the Aug. 2 contract expiry continues, said Bahr, estimating that perhaps 60% of the market is looking for a strike.

"People are expecting one only on the basis of the last few weeks, negotiations appear not to have gone too well and both sides appear far apart," he said. "But, having said that, negotiations will be more crucial toward expiry of the contract at the beginning of August."

A "significant portion" of copper's gains over the last two weeks or so are due to anticipation of a possible Escondida strike, explained Vaught.

September copper, traded on the Comex division of the New York Mercantile Exchange, has risen from a two-month low of $2.9145 a pound on June 14 to a six-week high of $3.7700 on Wednesday, a gain of 29%. Three-month copper on the London Metal Exchange has risen from around $6,410 to $8,210 a metric ton during that time.

Some buying by speculators and other market participants has already occurred in anticipation of a strike, yet a labor disruption is not fully factored in, meaning more gains are possible, said Bahr.

"If the strike were to take place and news were to hit the market, then you would see a strong knee-jerk response in prices," said Bahr.

Vaught pointed out that the Grupo Mexico La Caridad strike that began in late March was one of the catalysts that had helped copper jump from around $2.25 a pound to roughly the $4 area.

"You still have the La Caridad and another mine (Cananea) closed," he said. "So with the prospect of an even larger mine (Escondida) going on strike in early August, that holds pretty major bullish implications."

Chile's mining industry will remain in focus this fall, when contracts at some Codelco divisions are due to expire, added Bahr.

"That will have the potential, as much as Escondida, to really provide anxiety in the market," he said.

Ana Rebelo, chief statistician with the International Copper Study Group, provided data showing that Chile is the largest copper-producing country in the world.

Chile has annual capacity of roughly 5.5 million metric tons, out of a global capacity of 16.6 million, she said. Escondida has capacity of some 1.2 million metric tons, while the combined Codelco operations have capacity of 1.4 million metric tons, she reported.

Workers have been on strike against Grupo Mexico's two largest copper mines - La Caridad and Cananea. Union officials are demanding government support in an ongoing dispute over union leadership.

The La Caridad strike began March 24, and the company has said that the mine could be shut down in the not-too-distant future if the strike continues. On June 2, workers also went on strike at the Cananea mine.

Daily research reports from UBS and Man Financial note that Grupo Mexico has told clients that it will struggle to meet orders in August if strikes at its Mexican mines are not resolved. The company had declared force majeure on copper deliveries in recent months because of the strikes, although it has until now managed to meet most contracts, analysts said.

"There is also a contract coming up for renewal in Peru at the Antamina mine," Bahr reported.

A contract between workers and the mine, which is owned by a consortium of countries, expires July 24. However, Barclays and UBS research reports note that a union official has expressed optimism that an agreement could be reached without a strike.

"There are other labor tensions in Zambia," said Bahr. There have been slowdowns and various protests, although there is no actual strike occurring, he explained.

However, an agreement on a new labor contract was reached this week at the country's largest copper producer, Konkola Copper Mineshave, a union official reported. The old contract had expired June 30, but was extended three months while talks continued.

The worries about supply disruptions come at a time when global inventories are already at historically low levels - with LME stocks at 94,100 metric tons, Comex supplies at 7,510 short tons and Shanghai Futures Exchange inventories at 61,120 metric tons.

These inventories account for only a few days worth of global demand, pointed out Vaught.

"Not only are LME stocks for some metals at or are near critically low levels but those held throughout industry at metal exchanges, producers, consumers and merchants are telling a similar story," said Bahr.

He estimated total industry stocks of copper amount to only 2.4 weeks worth of global consumption. Supplies of other base metals are also tight, particularly nickel and zinc.

"The implication for those tight metals is clear - any supply interruptions will feed straight through to prices given the lack of an adequate cushion or buffer, with consumers remaining anxious about actual physical availability of metal," said Bahr. "With supply growth limited over the next 12 months, there is likely to be little opportunity for these stocks to be rebuilt to more comfortable levels."

July 17 (Bloomberg)

Copper Rises in Shanghai on Speculation Fund Buying to Continue


Copper prices in Shanghai rose amid speculation that investment and hedge funds may continue to buy the metal amid concerns that strikes may cut supply.

Workers at Grupo Mexico SA, the world's seventh-largest copper mine, resolved a strike at Cananea mine, restarting operations that were shut since June 1, Mexico's miners union said today. Still, this resolution doesn't mean that funds will sell, said analyst Wang Zheng, citing concern about a possible strike at Escondida, the world's largest copper mine.

``The definitive impact on prices is how funds will react to such news,'' Wang, a metal analyst at Shanghai Dalu Futures Co., said by phone today. ``In addition, there are possible labor disputes arising in the next one to two months, so I don't see the funds leaving the market just yet.''

Metal for September delivery rose as much as 1,320 yuan, or 1.9 percent, to 72,690 yuan ($9,090) a ton on the Shanghai Futures Exchange. It traded at 71,890 yuan at 9:40 a.m. local time.

Escondida's management has offered a rise of 1.5 percent above inflation, the same increase the company made three years ago. Output at the mine has fallen 10 percent below normal since workers started following safety procedures to the letter on July 7, labor union spokesman Pedro Marin said on July 12.

The mine's production may drop a further 15 percent unless BHP Billiton, which operates the mine, improves the wage offer, Metal Bulletin reported on July 14, citing Marin.

Shanghai Copper Gains as Traders See Pause in U.S. Rate Rises

July 20 (Bloomberg) -- Copper prices in Shanghai rose as some traders interpreted comments from the Federal Reserve chief to mean there'd be pause in interest rate rises, allaying concern higher borrowing costs may slow demand for the metal.

Policy makers must be wary of lifting interest rates too far, Fed Chairman Ben S. Bernanke told the Senate Banking Committee in Washington yesterday. Shanghai copper prices, which have doubled in the past year, are down about a fifth from a record high on May 15 partly on concern demand growth would slow in China and the U.S., the world's top users, as rates rose.

``After Bernanke's speech, the market thinks it is less likely that the Fed will raise interest rates in August,'' Cai Luoyi, metal analyst at China International Futures (Shanghai) Co., said. That's ``weakening the dollar and supporting copper prices.''

Metal for delivery in October rose as much as 1,370 yuan, or 2.1 percent, to 67,500 yuan ($8,445) a metric ton on the Shanghai Futures Exchange, after falling by the daily maximum allowable limit in the past two days. It traded at 66,870 yuan by midday break at 11:30 a.m. local time.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 1.3 percent to 65,850 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

The dollar fell for a second day after Bernanke's remarks, and on speculation that minutes of the Fed's last meeting, due for release later today, will show policy makers considered stopping a two-year campaign of raising interest rates. A weaker dollar makes copper, traded internationally in the currency, cheaper for users outside the U.S.

Dollar Declines

Ending the policy of raising borrowing costs may dull the appeal of U.S. assets compared with those of Europe and Japan, where central banks are lifting rates. The dollar yesterday fell the most in three weeks against the euro and dropped versus the yen after Bernanke's testimony.

Copper for delivery in September fell 0.5 percent to $3.575 a pound on the Comex division of the New York Mercantile Exchange at 12:12 p.m. Singapore time in after-hours trading.

The metal for three-month delivery fell as much as $94, or 1.2 percent, to $7,700 a metric ton on the London Metal Exchange, and traded at $7,755 at 12:13 p.m. Singapore time.

LONDON, July 20 (Reuters)

Vedanta Q1 core earnings up 280 pct to $589 mln


India-focused miner Vedanta Resources Plc (VED.L: Quote, Profile, Research) posted a 280 percent rise in first-quarter core earnings on Thursday, buoyed by booming metals prices, and said underlying demand for its commodities remained strong.

London-listed Vedanta said in a statement its earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $589.1 million in the three months to end-June, on revenues up 113 percent to $1.286 billion.

Mining Weekly - 20 July 2006

Zinc shortfall was 120 000 t in first 5 months


Zinc supply fell short of demand for the first five months of the year, because of higher consumption of the metal used to galvanize steel, the International Lead and Zinc Study Group said.

Zinc production was 120 000 tons less than demand, compared with a shortfall of 98,000 tons a year earlier, the Lisbon-based group said in a report on its Web site today. The group is funded by the governments of producing and consuming countries.

Demand rose 2,4% to 4,47-million t, the group said. Production grew 1,9% to 4,35-million t.

Source: Dow Jones - 20 July 2006

Copper sell-off by funds; Fundamentals sound: LME



London Metal Exchange three-month copper slumped Thursday as liquidation by commodity-trade advisory funds pressured prices back 6% below previous kerb levels, traders said.

Copper prices fell in $100 "gaps" in the run-up to late kerb in London on very little volume, ending the afternoon session down $430, or 5.5%, on previous kerb levels at $7,350 a metric ton.

"A late spell of liquidation by the speculative community knocked prices down but it's left people scratching their heads," said a broker.

Despite losses, market participants agree copper prices remain firmly underpinned by potential supply-side concerns including contract negotiations at major copper producers such as Codelco and Teck Cominco.

The union at Codelco's Escondida operations is to meet with management later Thursday to start negotiations ahead of their workers' Aug. 2 contract expiry.

"They've agreed to meet which is a good sign but, that alone, is not going to make investors sell," said a trader.

The possibility of a workers' strike at Teck Cominco Ltd.'s Highland Valley copper mine in Canada is also being closely watched by the market. Unionized workers have said they might decide to strike if they can't agree to a new wage deal by Oct. 1.

Dow Jones Newswires - 20 July 2006
DJ BASE METALS UPDATE:New Chile Copper Strike Threat -Report


Chile Codelco Contractors Threaten New Strike - Report

SANTIAGO (Dow Jones)--Unionized contract workers at copper giant Corporacion Nacional del Cobre de Chile's Teniente and Andina divisions are threatening to go on strike again, El Mercurio newspaper reported Wednesday.

(Reuters) - Sat Jul 22, 2006

Chile's Escondida union says contract talks fail

SANTIAGO, Chile, - Workers at Chile's Escondida, the world's biggest copper mine, said on Friday contract talks with the company had failed and that they planned to vote on a strike next week barring a new offer.

"It looks like we'll strike," Union Secretary Pedro Marin told Reuters late on Friday after two days of extraordinary talks failed to result in a new offer from the company.

Workers reached the decision in a meeting late on Friday night, Marin said.

The union and managers at Escondida, majority owned by global mining giant BHP Billiton, were in talks on Thursday and Friday to try to reach an agreement ahead of a strike vote by workers next week.

The last day for the company to improve its offer is July 25, so workers can vote on July 28 on whether to strike.

Marin said that a strike could begin on Aug. 1 unless the company requests mediation from labor authorities, in which case the sides have five days to resolve their differences.

The union, which represents more than 2,000 workers, began a slowdown this month to protest a wage increase offer that it called too small. The current contract expires on Aug. 2.

This week, the company invited workers to resume formal talks and workers and managers of Escondida met on Thursday and Friday.

"If you ask me about progress...zero," Marin said of the two days of talks.

With global copper prices surging, the Escondida union is asking for a 13 percent raise and a $30,000 net bonus per worker. The company has offered a 1.5 percent raise, a bonus and low-interest loans worth about $8,500 per worker.

BHP Billiton, the world's largest miner, owns 57.5 percent of the open-pit mine, while number-two Rio Tinto has a 30 percent stake.

Mining stocks were also in demand, lifted by a bullish note on the sector by UBS and firmer commodity prices amid concerns over supply disruptions and continued uncertainty over the escalating situation in the Middle East.

Copper prices rose 1.5 pct amid nervousness ahead of a strike vote tomorrow at Chile's Escondida mine, riots at Zambia's Chambishi mine and production losses at Chile's Chuquicamata mine.

In a note to clients, UBS raised its commodity price forecasts for copper, nickel, iron ore, platinum and molybdenum by an average of 7 pct in 2006 and 19 pct in 2007, following revisions to its supply-demand balances.

It told clients that although volatility may continue, it believes the shares are supported by attractive valuations, noting that its top picks are Xstrata and Lonmin.

Xstrata shares were up 108 pence to 2,142, also boosted by news that it intends to buy up to 5 pct of Falconbridge shares on the Toronto Stock Exchange, raising its chances of success in the battle for the Canadian nickel miner.

Elsewhere, copper plays Kazakhmys and Antofagasta gained 61 pence to 1,246 and 15 pence to 412-3/4 respectively, while Vedanta added 61 pence to 1,322 and Lonmin put on 70 pence to 2,846.

....Looks like a case of take your pic boys and girls.

Commodities boom seen lasting 4-5 years on demand


SEOUL, JULY 27: The boom in commodities will last another four or five years as supplies remain short due to underinvestment in mines and demand from emerging economies keeps rising, a senior fund manager in South Korea said on Thursday.

Inflation worries around the global economy will also cause commodity investments to shine among the dull returns from stocks and bonds, Kang Chungmo, senior manager at Woori Credit Suisse Asset Management, said. The commodities game will be much better than stocks and bonds for about four to five years, Kang said in an interview.

He manages an 80 billion won ($83.82 million) commodity fund, the largest one in Asia. The valuation for commodities, unlike stocks and bonds, is very difficult to do, so prices are completely decided by supply and demand. I believe there is a five-six year gap before commodity supply and demand will match.

Backed by the recent bullishness in commodities, Woori in March started sales of a fund that invests solely in commodities, the first of its kind in the country. The fund uses a basket of 19 commodities, tracking the Reuters/Jefferies CRB Index, which comprises futures from corn, gold, copper and crude oil.

We are basically following the weighting of the CRB, but personally I think gold and crude oil are the most favourable commodities, while copper only has 10-15% further to rise, Kang said. CRB index now weights 23% in crude oil and 6% each in gold, copper and corn.

Global prices of gold should hit $1,000 an ounce in three years, from $620 at present, Kang added. The Woori fund is up about 6.7% so far, after rising 12% in early May, and Kang is aiming for 10-12% in annual returns. In contrast, South Koreas KOSPI index has fallen 7% this year, after a 54% rise last year.

Woori is considering offering more commodity funds to attract a broader range of investors to the market. But investors are limited to individuals because regulations forbid big pension funds in South Korea from putting their money into commodities.

The health and welfare ministry, which regulates the pension funds, is considering allowing the funds to invest outside of stocks and bonds.

Commodity funds are drawing more attention, but it will take two years until big institutional investors are cashing in on the hot commodity market. Then the demand for commodity funds.

Reuters

Big Mining Is Big Value

By Alun Morris
July 28, 2006

I don't often buy large cap shares. I prefer to stay away from the thousand Watt arc lamps of multiple broker analysis and take my flashlight around the darker corners of the market.

However this month I bought a share in a sector that looks so cheap that I couldn't keep my grasping value hands off it any longer. I have been mulling a move on big mining since UK investing legend Jim Slater said in February that mining shares were cheap. In fact he thought the rating of this sector was one of the most serious mis-pricing of markets he had ever seen, showing high growth and low P/Es. Being fully invested I didn't buy. Besides, these huge companies have more analysts than Woody Allen, so where's my edge?



Why are big miners so cheap?

This sector is cheap for a reason. Metal prices have run up a hill that's got steeper and steeper and we don't know if there's a cliff at the end. Copper, nickel and zinc have doubled or trebled in the past year, largely due to rapid growth and construction spending in China and India. Many see it as yet another bubble with prices overshooting due to speculation. The futures market is predicting significant falls in prices next year. Demand would fall if the Chinese or Indian economies stumble..

The bull arguments are:

* The same was said about oil last year but the futures market is now predicting $70+ oil until 2011.

* New mines take six to seven years to enter production, so the recent rush to start new mines will not give a big supply boost until the end of the decade.

* Chinese growth seems to be underpinned by endless demand for ever cheaper consumer goods.

I believe that mining shares offer the same opportunity that the oil and gas sector did a year ago -- their prices considerably lag the rise in the commodities they produce.



So which is the cheapest?

An excellent Metals and Mining report from Deutsche Bank this month looked at seven UK listed shares. The table below has excitingly low ratios, especially cashflow, and uses Deutsche's estimates adjusted for Wednesday's prices:

                       2007 P/E
Anglo American      9.2
Antofagasta          7.1
BHP Billiton            8.2
Kazakhmys            6.5
Lonmin                11.4
Rio Tinto               8.4
Vedanta                7.2



see article and table in full here


Cash

Cash, cash, cash! Music to my ears. The sector has more cash than it knows how to spend, hence the very low P/CF and EV/EBITDA figures. I decided to buy Vedanta -- it has the lowest 2007 cashflow ratios and nearly the lowest P/E. These reflect forecast output growth of 48% over the next 3 years., far higher than the others at about 5% to 25%. Jim Slater likes it too -- in a talk in June his picks were BHP Billiton and Vedanta.

Be prepared for a bumpy ride. These shares will often move two or three times as much as the FTSE-100 in a day. If you can stomach this and the risk of a slump in copper prices (and the forecasts already assume some decline), Vedanta looks the cheapest of the bunch.

Am i blind or just plain dumb? ..... surely KAZ (and ANTO) is cheaper that VED, though KAZ from memory is a copper play while VED is fairly heavily into zinc ...... and surely it is a safer(?) bet to play the commodities straight rather than relying on the vagaries of companies who are at least one step removed

Workers vote for Escondida mine strike

Sat Jul 29, 2006 - By Pav Jordan


SANTIAGO, Chile (Reuters) - Workers at Chile's Escondida, the world's largest copper mine, voted overwhelmingly on Friday to strike to demand a new contract offer from the company that reflected soaring copper prices.

With global copper prices surging and markets nervous about supplies, 97 percent of 2,052 union workers at the mine had participated in the vote for a strike late on Friday.

"Some 97 percent of workers voted to strike," Union Secretary Pedro Marin told Reuters after votes were tallied.

He said the company will seek government mediation to hold off the strike, giving sides five more days to resolve their differences before workers walk off the job.

Marin said 1,994 workers voted, with the remaining 58 workers not participating because they were on holiday or otherwise not available.

"Only one vote was in favour of the company. One vote was blank," he said.

"On Monday we'll be talking with the company," Marin said.

With copper prices more than five times what they were when the union negotiated a 2003 contract that expires on August 2, workers are demanding a large raise from Escondida. The mine is majority-owned by global miner BHP Billiton.

Copper prices have soared amid strong demand from China's booming economy and solid global economic growth.

In New York, copper futures rose 2 percent on Friday amid jitters about the Escondida strike vote and a rockslide this week at the huge Chuquicamata copper mine, owned by top copper producer Codelco.

Workers were voting throughout the day on Friday, as shifts entered and exited the massive open-pit mine in northern Chile, and as union members on leave voted in surrounding towns.

Escondida expects 2006 copper output to be similar to last year's level of 1.27 million tonnes.

BHP Billiton, the world's largest miner, owns 57.5 percent of the open-pit mine, while number-two Rio Tinto has a 30 percent stake.

Billiton could not be reached for comment.

If government mediation fails, a strike likely would begin on August 7.

Three big miners issue interim results this week:

Wednesday:  Xstrata
Thursday:     Rio Tinto
Friday:         Anglo American


With vedanta issuing record busting results last week and the copper strike in Chile kicking off, all mining prices should get a boost this week.

Wednesday, July 26, 2006
Oligopoly Watch: - The latest maneuvers of the new oligopolies and what they mean.

Consolidation fever in the mining industry

Mining companies have been rolling up the industry over the past few years, and the consensus is that that trend will continue until there are no possible buy reagents left. That's the conclusion of a Financial Times article ("Miners roll up their sleeves to consolidate scarce resources", 7/25/06).

The most immediate sign of the buying frenzy is in the current duel between Phelps Dodge and Xstrata to buy Canada-based Falconbridge, a bidding war that has doubled the price of that company from around $10 billion to over $20 billion.

But that's not the only deal in the works.

* Australian iron ore miner Mount Gibson just made a bid for rival Aztec, hoping to boost the company to #3 status in Australia.
* Canada's GlobeStar Mining Corporation just bought out Dominican Republic nickel mines from Everton Resources Inc.
* Canada's Stornoway Diamond Corp. has bid to buy Canada's Ashton Mining and Contact Diamond Corporation, both diamond mining companies.
* New Zealand's Oceana Gold recently acquired Australia's Climax Mining, another gold miner.
* Canada's Barrick Gold has made an offer to buy Canadian rival NovaGold.

And these are just the deals happening in the last few months, all worth at least hundreds of millions of dollars.

Because metals prices are so high, the mining companies are loaded with cash. That means that even $20 billion acquisitions are doable. Some mid-size mining firms drawing strong interest are Alumina, Newcrest, Lonmin and Vedanta. There are twenty mining companies in the world with between five and 20 billion dollars in revenue, and all bets are that there will be significantly next within a few years. And the bidding, as for Falconbridge, is likely to be strongly contested.

And, as we've seen with big oil, acquiring established sources is far more desirable than spending money on exploration. The FT article quotes a Citigroup analyst as saying: "Acquisitions and buybacks deliver better returns than the expansion of production."

Older miners are wearing out faster than new mines are discovered. Also, the increasing environmental controls and Third-World nationalism make the cost of new mines grow ever higher.

Plus some very big companies are rumored, according to the article, to be targets. Aluminum company Alcoa is one of them, as is rival Alcan. Even gold and diamond giant Anglo-American may be tempting, now that is selling off both its steel and paper operations, making a pure mining play.

Companies like Rio Tinto and BHP Billiton are identified as possible predators. Both are set to generate many billions in cash this year, thanks to skyrocketing iron ore prices. Even smaller deals (purchases of single mines) are significant, as bigger companies keep rolling up smaller ones.

Harry (and others) ...... for all the truth in newspaper article etc, be wary of getting too greedy (yes, we've all done it) and don't chase any old mining company just because it just might be a t/o target ..... in conclusion, buy on fundamentals with any potential t/o as a bonus, and it would do no harm to put in place trailing stops.

Thanks C, and noted by many of us i should think.

the big Q is what to do tomorrow if anything .... lol!

Depends on peoples strategies as always.

Times Online July 31, 2006

Need to Know

Vedanta Resources, the miner, is to hold its annual meeting on Wednesday. Its first-quarter results, reported two weeks ago, showed revenue up 113 per cent to 1.3 billion.


Xstrata, the Swiss-based and London-listed mining group, is planning a rights issue of up to 2.75 billion to finance its acquisition of Falconbridge, the Canadian nickel and copper group. The way was cleared for Xstratas 10.8 billion bid to succeed when Inco, its Canadian rival, withdrew its offer on Friday. (The Sunday Telegraph)


Rio Tinto, the Anglo- Australian mining giant, which recently reported a 4 per cent rise in first-half iron ore production, is to report its first-half results on Thursday.

Copper Futures Rise as Prospect of Escondida Srtike Stokes Supply Concern

July 31 (Bloomberg) -- Copper prices rose amid concern Chile's Escondida mine, the world's biggest copper producer, will be shut by a strike next week, squeezing global supply.

Workers voted to stop work at the mine operated by BHP Billiton on Aug. 7, based on a tally of more than half of votes cast on July 28, Pedro Marin, a spokesman for the Escondida Workers' Union No. 1, said. Miners want wages to rise by 13 percentage points above the inflation rate, while management has offered 1.5 points above inflation.

``It looks like it's hard to avoid a strike as the difference between the union and management is too big,'' Cai Luoyi, a metal analyst at China International Futures (Shanghai) Co., said by phone.

Copper for three-month delivery rose as much as $133, or 1.7 percent, to $7,803 a metric ton on the London Metal Exchange. It traded at $7,790 at 8:24 a.m. London time, posting a 10.7 percent gain in the past six days.

Metal for delivery in October rose 2,530 yuan, or 3.9 percent, to settle at 67,640 yuan ($8,491) a ton on the Shanghai Futures Exchange when trading ended at 3:00 p.m. local time. It earlier rose by the daily allowable maximum gain of 4 percent.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 4.7 percent to 67,780 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Escondida accounted for 8.5 percent of copper mined worldwide last year. BHP Billiton owns 57.5 percent of the mine, Rio Tinto Group owns 30 percent and a group led by Mitsubishi Corp. owns 10 percent. The International Finance Corp. owns the rest.

Supply Shortfall

Demand will exceed production by about 200,000 tons this year, unchanged from last year, UBS AG, Europe's largest bank by assets, said in a July 27 report. There has been a shortfall since 2003, according to UBS. The price of copper, used to make pipes and wires, has more than doubled in the past year.

Inventories monitored by exchanges in London, Shanghai and New York fell 4.7 percent to a seven-month low of 155,350 tons this month, data compiled by Bloomberg News shows.

``A prolonged strike is likely to affect refined production, and aggravate the tight copper supply in China,'' Li Rong, a metal analyst at Great Wall Futures Corp., said by phone from Shanghai.

Stockpiles monitored by the Shanghai Futures Exchange fell to an eight-week low last week.

Source: Dow Jones - 31 July 2006

Supply jitters push LME copper to two-week high: LME


London Metal Exchange three-month copper benefited from supply-side jitters Monday, moving higher on the strength of the strike vote by Escondida copper mine workers late Friday.

Copper moved to a two-week high of $7,980 a metric ton towards the end of Monday's session, closing just shy of that level at $7,949/ton at late PM kerb in London.

"Even though a strike vote at Escondida had been broadly expected, the unanimous nature of the outcome with 97% in favor of strike actions prompted buying nevertheless," said Roy Carson, analyst at Triland Metals Ltd.

Apart from news of the strike vote, the base metals market was also digesting news that Mexican mining giant Grupo Mexico SA may be mulling a play for Phelps Dodge Corp., as reported by The Globe and Mail newspaper, Monday.

The article cited "sources" but didn't identify them, saying only Phelps aims to take over Canadian nickel miner Inco Ltd. after plans for a three-way combination with Falconbridge Ltd. fell through.

The remainder of the complex also moved higher on the strength of copper's gains with zinc recording the strongest intra-day gains, up 3.6% on Friday's PM kerb price at $3,415/ton.

Nickel also gained, rising $795 to $25,495/ton at PM kerb, buoyed by a continuation of the seasonal pattern of LME warehouse stock drawdowns and rising canceled warrants. LME warehouse stocks of nickel fell 4,128 tons Monday, while canceled warrants rose to 67%.

Aluminium prices breached nearby resistance at $2,550/ton during the afternoon session, moving higher still to close at $2,565/ton at late kerb, mainly on the strength of short-covering, according to Triland.

Well worth reading the long article in today's Telegraph re Xstrata ...... MD talks openly about the huge escalation of production costs and their effect on profitability, especially if there is a dip in commodity prices ..... That said he remains very bullish about nickel (see bid for Falconbridge!) and zinc.

Will now start thread for ENK which I think may well prove to be a profitable nickel mining investment.

Thanks for that C, on the point about zinc i think VED have plenty of that -);

yes they do ..... and from memory they also commented on the heavy adverse effect of escalating production costs

With VED having said that it means that the news is in the public domain, therefore by definition in the price. The only concern i have is, on what basis are they escalating? if it's wages+ conditions then i think that can be managed.

Refining/smelting or whatever is the correct term, assuredly uses HUGE volumes of "energy" .... and we all know what has happened with oil and gas prices

BBC - 3 Aug 2006

Largest copper mine facing strike


The world's largest privately-owned copper mine could see production halted next week, as workers threaten strike action after rejecting a pay offer.

Labour relations at the Escondida mine in Chile have deteriorated as staff hold out for a 13% salary rise and a 16m peso ($16,900; 8,900) bonus.

The mine operators' latest bid had been a pay increase of 3% and a bonus of 8.1m peso, double their previous offer.

Workers said a strike could still be averted at talks late on Thursday.

'Good will'

"If there is real good will to solve this, a strike may be averted," said workers' spokesman Pedro Marin.

Mr Marin said that the latest pay proposal was massively and absolutely rejected by the mine's 2,000 workers.

Should the talks fail on Thursday and Friday then the strike would start on Monday.

The Escondida copper mine is 57.5%-owned by BHP Billiton, while fellow miner Rio Tinto owns 30%. The remaining stock is held by a Japanese-led consortium, with a small stake in the hands of International Finance Corp.

The labour dispute comes as world commodity prices have surged, partly due to a surge in demand for metals and partly as supplies become squeezed.

Analysts said that any disruption to output at Escondida, which is expected to produce 1.4 million tonnes of copper this year, may lead to copper prices rising on the international market.

Aug. 4 (Bloomberg)

Copper Leads Gains in Metals on Looming Strike, Lower Dollar


Copper gained the most in four weeks, leading a metals rally on speculation that a looming strike at the world's biggest copper mine will reduce supply and after the dollar fell following a worse-than-expected U.S. jobs report.

Workers at the BHP Billiton mine in Chile, which produced 8.5 percent of the world's copper last year, said they will strike Aug. 7 unless they get a better pay offer. U.S. employers added fewer jobs than expected in July and the unemployment rate climbed, the government said, causing the dollar to fall to a one-month low, making it cheaper to buy dollar-priced metals.

``Any production that's taken offline will have an impact.'' said Jimmy Quinn, a trader at A.G. Edwards Inc. in New York, who also said U.S. jobs data ``plummeted the dollar,'' which caused metals prices to rise.

Copper for delivery in three months on the London Metal Exchange rose $380, or 5 percent, to $7,870 a metric ton as of 3:27 p.m. local time. The metal was up 2.6 percent for the week, heading for the fifth weekly gain in six weeks.

On the Comex division of the New York Mercantile Exchange, copper for delivery in September gained 12.6 cents, or 3.6 percent, to $3.615 a pound at 10:29 a.m. local time. In both London and New York, a close at these levels would mark the biggest one-day percentage gain since July 6.

Among other metals for delivery in three months on the LME, nickel gained $1,200 to $25,600 a ton, aluminum added $43 to $2,542, lead rose $18 to $1,135, tin was $150 higher at $8,350 and zinc advanced $142 to $3,462.

The U.S. dollar fell to a one-month low against the euro and dropped versus the yen after a report showing the U.S. added fewer jobs than expected. Employers added 113,000 jobs last month after an increase of 124,000 in June. That was less than the 144,000 projected by the average forecast in a Bloomberg News survey. The jobless rate rose to 4.8 percent.

Copper has risen 79 percent this year in London, and traded at a record $8,800 on May 11. The rally has been supported by labor disputes at mines in Mexico and Chile. Demand will beat output this year by about 200,000 tons, UBS AG forecast in July.



Inventory Gain

Consumers of the metal, such as makers of power cables and pipes for plumbing, may use stockpiled copper to fill the shortfall. Inventory monitored by the LME gained 1.2 percent to 102,825 tons today, the exchange said. The inventory is equal to less than three days of global consumption.

BHP, which is based in Melbourne, needs to close the gap with the labor union's wage demand for a raise that would be 13 percentage points above inflation, union spokesman Pedro Marin said. The company's last offer, made Aug. 2, was 3 percentage points over inflation. Marin said a new offer needs to be made by today at the latest to avoid a strike, because the union needs time to vote.

The planned strike is ``really supporting the market,'' said Neil Buxton, managing director of London-based GFMS Metals Consulting Ltd. ``In bull markets you get more strikes; it's always been the case.''

Copper yesterday fell 4.2 percent in London on speculation interest rate increases by the Bank of England and the European Central Bank will slow economic growth and curb metals demand.

The market was ``overreacting,'' and U.S. interest rates are of greater importance, Buxton said. Federal Reserve policy makers will meet Aug. 8 to decide on the benchmark overnight lending rate between banks.



Futures Forecast

Ten of 15 analysts, investors, traders and consumers surveyed Aug. 2 and yesterday by Bloomberg News said copper will rise next week. Four said it will drop and one forecast little change.

A strike ``will naturally drive the price of copper up to test the highs made in May,'' said Mark Lewon, vice president of operations for Utah Metal Works, a scrap-metal recycler and broker in Salt Lake City.

More wage negotiations are due at mines including Teck Cominco Ltd.'s Highland Valley in Canada. The management at Antamina, a Peruvian mine owned by BHP Billiton and Canada's Falconbridge Ltd., is talking with workers, said mine spokesman Gonzalo Quijandria. Chile's state-owned miner Codelco is due to negotiate with employees later this year.

``Even if there's no strike (at Escondida), and prices lose this source of support, there are the Highland Valley, Antamina, and Codelco labor-contract negotiations still to work through,'' said Andy Cole, a London-based analyst at Metal Bulletin Research. ``There's still plenty of support for prices out there.''

4 Aug 2006 05:25 GMT
DJ FOCUS:Escondida Deadline To Set Course For Copper Prices
By James Attwood and Glenys Sim


SYDNEY (Dow Jones)--A looming deadline for labor negotiations at the world's biggest copper mine could be the trigger for a breakout of the red metal's tightening trading range, analysts and traders said Friday.

While the reaction may not be overly dramatic, "this could be the catalyst for a move that could be with us for a while," said Jonathan Barratt, head of foreign exchange and metals trading at Sydney-based investment firm Tricom Group.

The widely-expected strike at Chile's Escondida mine has largely been factored into copper prices, and the company says it has a contingency plan to maintain output in the event of a strike.

However, market observers maintain confirmation of a strike will lift prices "maybe a few hundred dollars," while an eleventh hour settlement will probably have an even bigger impact on the downside.

While the market's overall direction is unlikely to swing on just one event, low summer volumes and a lack of outlook consensus makes it vulnerable. Chart patterns too suggest copper prices may be ready to break out of their recent range.

"Currently there isn't much news to drive the market - one is the Escondida issue and the other is next week's Fed. rate decision," said Maike Futures executive vice president Haihua Shen.

"It's a very uncertain environment and (they are) very uncertain events," he added.

Unless Escondida management, led by BHP Billiton (BHP), puts a fresh offer on the table by Friday night local time, workers have vowed to start a general strike Monday morning.

If the strike happens, there will be production losses of 25,000 metric tons of copper per week, said analysts at European copper producer and refiner Norddeutsche Affinerie.

The industry fears a strike at Escondida could trigger industrial action at other major mines as workers seek a share of near record prices that are swelling company coffers.

Labor contracts are coming up for renewal at BHP's Antamina mine in Peru as well as mines at Chile state-owned Corporacion Nacional del Cobre de Chile and Falconbridge Ltd.'s (FAL) Altonorte smelter.

"To put the severity of the situation into perspective, some 15%-20% of world production capacity is, or will be, exposed to the threat of labor unrest at some point in the second half of this year," Standard Bank said in a report this week.


Global Growth Concerns In Focus

Meanwhile, global growth concerns have come back into focus after both the European Central Bank and the Bank of England raised lending rates overnight.

Europe's rate rises intensify investor concerns that the U.S. Federal Reserve may follow suit next week and that Beijing's stepped-up efforts to cool growth may go too far and hurt global metal demand.

"Higher interest rates will, in time, slow overall spending growth and that will mean reduced demand for base metals among other things," said Commonwealth Bank of Australia analyst, Tobin Gorey.

After soaring to an all-time high of around $8,800 a ton in mid May as investors reacted to tightening fundamentals, copper plunged nearly 30% over the next month with rising interest rates casting a shadow over global growth prospects.

Since then, the flagship base metal has been consolidating, with prices whipping around a wide range amid low volumes while concerns over U.S. and Chinese industrial demand battle with a string of supply side disruptions.

The London Metal Exchange benchmark contract ended the late kerb Thursday at $7,490/ton.

Analysts note copper's price fluctuations are occurring within an ever tightening range, suggesting the market may be ready for a breakout, which could establish a significant trend for the entire base metals complex.


Technical Turning Point Approaching?

Dow Jones technical analyst David Rogers said a symmetrical triangle formation has emerged in copper's charts, with a rising support line near $7,210 and a falling resistance line near $8,000.

"It's the most significant pattern for a quite some time," Rogers said.

"A break of the July high at $8,200 would suggest an upside break was clearly underway, while a break of the July low at $7,010 would suggest a sustained downside break was unfolding," he said.

In theory, a sustained break of the triangle support or resistance lines, on rising volume, should generate a move equal to the height of the pattern, which is $2,300.

Falling volume during the formation of the pattern increases its significance, Rogers noted.

From a fundamental perspective, a strike confirmation could send prices from current levels at around $7,600/ton towards the psychological $8,000/ton level, said analysts.

As long as next week's Fed decision isn't interpreted as being too much of a growth dampener, copper will likely set its sights on May's all time high, they said.

On the flip side, a strike aversion could lead to a run back to the psychological $7,000 level.

And a break below that could cast a shadow over the sustainability of market's four-year uptrend, analysts said.

World's largest copper mine faces strike threat
Posted: 05 August 2006 0327 hrs


SANTIAGO : Workers at the world's biggest copper mine in Chile threatened to go on strike next week after the collapse of salary negotiations.

The work stoppage at Minera Escondida, which is controlled by Anglo-Australian mining giant BHP Billiton, will start Monday if management fails to make a new offer to the miners, said the union representing 2,000 workers.

"If the company's new offer is not close to our demands, we will not accept it," said union leader Pedro Marin. "We have made our decision with the complete support of our base."

The mine's spokesman, Mauro Valdes, said the company was willing to reach an agreement that is "responsible for both sides."

In its last offer Wednesday, the company proposed a three percent salary increase and a 15,000 dollar bonus to each miner, but the union rejected it as an "insult."

The miners are asking for a 13-percent salary increase and a 30,000 dollar bonus, as the price of copper has nearly quadrupled over the last three years.

Mina Escondida, located in the Atacama desert in northern Chile, produces eight percent of the world's copper.

Its main customers are Japan, Germany, Canada, China, Sweden, Brazil, South Korea and France.

- AFP /ls

dai ...... would appreciate your thoughts ..... it is inevitable that the chilean strike will be settled sooner or later (probably sooner), with the only long term effect being a (significant) increase in the wage bill ...... whether or not that will have a significant impact on profitability (end price of copper), i do not know, but rather doubt it.

as to the price of copper itself, i cannot see any way that it can continue to escalate indefinitely or even much further, without a severe reaction to its price .... imo, this is inevitable and fairly imminent (within 3/6 months) ....... however, that does not mean the end to its increasing demand relative to production capacity; merely a sharp shake up in the producers' sp followed by consolidation and then (hopefully) a sensible and steady recovery.

so, having "done" copper, what is likely to happen to other hard commodity prices such as zinc? ..... i suspect that that price, though historically high, has not reached the giddy relative level of copper, though there will be some follow through if the copper price suddenly tumbles.

gold is, i think, a law unto itself.

To me, metal prices are presently going through a stabilizing process. Once worldwide markets and dealers are conditioned to this then metal prices will begin to take another step forward. I see no way that metals have reached a peak from where they are going to retrace. There are too many forward-driving forces that will sustain increasingly higher metal prices (scarcity, strikes, developing economies).

It's all eyes on the Fed and a possible Mid-East cease-fire this week. If the Fed don't raise rates and somehow a cease-fire can be brokered then imo prices will rise across the board. Who knows what will happen - or when??? If we did then we would all be happy as Larry! That's the name of the game: you pays your money and you makes your choice. Good luck!

Associated Press - August 06, 2006

Chile Copper Mine Workers Set to Strike


SANTIAGO, Chile (AP) - Workers at the world's largest privately owned copper mine will walk off their jobs early Monday after rejecting the company's latest offer for a new contract, union spokesman Pedro Marin said.

"The cards are on the table, we are going to strike," Marin told The Associated Press by telephone Sunday.

He said the stoppage will start with the first work shift Monday morning.

The union representing the company's 2,052 approved the strike after turning down a second, improved contract offer by the company calling for a three percent across the board salary increase and a one-time bonus of U$17,00 (euro13,200).

The union stood by its demand of a 13 percent wage increase and a U$29,000 (euro24,800) bonus.

The strike was approved leaders after final talks late Saturday, ending five days of a government "goodwill mediation" failed to produce an agreement. A general vote on the proposal will still take place.

The company has a "contingency plan" to face the strike, a spokesman, Mauro Valdes, said. He gave no details.

Union spokesman Marin said the plan aims at trying to maintain production "with contractors and outside workers."

Escondida, 1,600 kilometers (995 miles) north of Santiago, produced 1.27 million metric tons of copper last year, or nearly one quarter of Chile's total output. Chile is the world's largest copper exporter.

The Australian-British consortium BHP Billiton PLC controls 57.5 percent stake at of the mine, while Rio Tinto PLC, also Australian-British, holds 30 percent, and Mitsubishi Corp.-led Japanese consortium 10 percent.

Copper Futures Rise as Strike May Start Today as World's Top Mine in Chile

Aug. 7 (Bloomberg) -- Copper futures rose as a looming strike at the world's largest copper mine, due to start at 8 a.m. New York time, stoked concern about supply disruption at a time of robust global demand for the metal.

Workers will walk off the job at Escondida in Chile as part of a protest over wages, Pedro Marin, a spokesman for the Escondida Workers' Union No. 1, said. ``The strike is on,'' said Marin, speaking ten hours ahead of the planned stoppage. Escondida, run by Melbourne-based BHP Billiton, produced 8.5 percent of copper mined worldwide last year.

``With copper at such high price levels, mine unions the world over feel it's a good time to bargain,'' Hu Kaixi, a copper trader at China International Futures Co., said from Shanghai. ``The concern is that supply disruption will probably follow in other mines.''

Copper for three-month delivery on the London Metal Exchange, the world's largest such bourse, gained as much as $170, or 2.2 percent, to trade at $8,030 a metric ton. The contract, reached a record at $8,800 a ton in May, traded at $7,875 a ton at 8:11 a.m. in London.

``Unless the company offers workers a contract with improved terms that the workers accept, a strike looks imminent,'' Kevin Norrish, an analyst at Barclays Capital in London, said in a report dated Aug. 4. A strike will probably paralyze production at Escondida, Norrish said, citing the secretary for the mine union.

The strike won't affect copper output from the mine initially as ore from stockpiles can keep the processing plants running, Emma Meade, spokeswoman at BHP Billiton, said today.

`Output Not Affected'

``Copper output is not affected yet because of stocks and feeding with higher grades, but stripping is delayed and will have an impact in the future,'' Meade said. She wasn't more specific.

Copper for delivery in October rose 2,100 yuan, or 3.1 percent, to settle at 69,710 yuan ($8,748) a ton on the Shanghai Futures Exchange. The contract reached a record 85,550 yuan in May.

Workers at Escondida want wage increases to reflect part of the surge in prices for copper, Marin said from the Chilean city of Antofagasta. The price of copper, which is used in pipes and wires, has more than doubled in the past year.

The Escondida union wants a rise of 13 percentage points above inflation, plus a bonus of 16 million pesos ($29,496) per worker. The union has said its 2,052 members represent about 94 percent of the mine's workers.

BHP has offered Escondida staff a wage rise of 3 percentage points above inflation, bonuses of 8.5 million pesos per worker, and is also pledging to build miners a soccer field.

Rio Tinto, Mitsubishi

BHP Billiton owns 57.5 percent of Escondida, Rio Tinto Plc owns 30 percent and a group led by Mitsubishi Corp. owns 10 percent. The International Finance Corp. owns the rest.

Metal for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 3.1 percent to 70,300 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Copper for delivery in September fell 0.25 cents, or 0.1 percent, to $3.63 a pound on the Comex division of the New York Mercantile Exchange at 3:14 p.m. Singapore time in after-hours trade.

Labor problems have flared at other mines. Grupo Mexico SA, the world's seventh-largest copper miner, resolved a strike at its Cananea mine on July 16 after union workers shut it down on June 1.

A union representing workers at Teck Cominco Ltd.'s Highland Valley mine said it'll lead a strike from Oct. 1, halting output at Canada's largest copper mine, unless a new wage deal is agreed.

DO,

"There are too many forward-driving forces that will sustain increasingly higher metal prices (scarcity, strikes, developing economies)."

Well put, Sort of sum's my feelings up at the moment.

Associated Press - 8 August 2006

Strike begins at copper mine in Chile

Workers at the world's largest privately owned copper mine in northern Chile went on strike Monday to press their demand for better pay, and by midday production was down by 60 percent, a company official reported.

Union spokesman Pedro Marin said workers were gathering at a plaza in Antofagasta, 1,600 kilometers (995 miles) north of Santiago, for a planned march.

Other miners blocked an access road to the mine with rocks and parked buses.

A union assembly was scheduled for late Monday and a vote on the company's contract proposal was likely, Marin said. The proposal was rejected by the union leadership.

The company has called its contract offer, made in government-mediated talks, final. It includes a 3 percent salary increase and one-time bonus of US$17,000 (13,200).

The workers are asking for a 13 percent wage increase and a bonus of US$21,190 (18,400).

There was no immediate comment by the company on Monday's work stoppage but it said earlier that it would implement a "contingency plan." No details of the plan were announced, but Marin said it includes hiring around 1,000 outside workers and contractors to maintain some production.

Around noon Monday, a company spokesman, Mauro Valdes, told the Santiago daily El Mercurio that production had dropped by around 60 percent.

Escondida produces around 3.6 metric tons (4 tons) a day, or around one quarter of Chile's total output. Chile is the world's largest copper exporter.

The Australian-British consortium BHP Billiton PLC owns 57.5 percent of the mine, while Rio Tinto PLC, also Australian-British, holds 30 percent, and the Mitsubishi Corp.-led Japanese consortium 10 percent.

Main markets for the mine's production include Brazil, China, France, Japan and South Korea.

Strike starts at Chile copper mine

By Pav Jordan Mon Aug 7, 2:05 PM ET

SANTIAGO, Chile (Reuters) - Workers drew first blood in their fight with Chile's Escondida copper mine, cutting 60 percent from daily production as they walked off the job to demand a wage and benefits hike from its foreign owners.
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"Around 60 percent of output," is being affected by the strike, BHP Billiton spokesman Mauro Valdes told Reuters on Monday, hours after the widely anticipated walkout. Workers said the strike cut production by as much as 80 percent.

The mine, the world's largest copper mine, applied an immediate contingency plan to maintain basic output, but Valdes could not say what the effects of a prolonged strike might be.

"Minera Escondida reiterates it desire to maintain dialogue (with workers) and trusts the strike will be carried out in a responsible and legal form," the company said in a statement.

Workers at Escondida, which produces about 20 percent of Chile's copper and accounts for 2.5 percent of the country's gross domestic product, are demanding a new contract to replace a 2003 deal that was signed when copper prices were about a fifth of what they are now.

Local television showed union workers tossing rocks the size of basketballs onto the road leading to the mine in northern Chile to obstruct the potential entry of transports carrying replacement personnel.

Talks between the company and the union grew increasingly combative in recent weeks, with each accusing the other of not ceding ground in their demands.

Union President Luis Troncoso said there was no plan to halt the strike until the company improves its offer.

Workers say they have the support of other Chilean mining unions, and that their fight could influence the outcome of upcoming negotiations at Codelco, Chile's state copper miner and the world's largest producer of the red metal.

"I think we are fortifying the (national) union movement," Troncoso said.

BHP Billiton (BHP.AX), the world's largest miner, owns 57.5 percent of the open-pit mine, while No. 2 Rio Tinto Ltd (RIO.AX) has a 30 percent stake.

While workers are demanding a large increase in salary and benefits that reflect soaring copper prices, the company seeks to protect itself from the next cyclical downturn in prices for the red metal.

Before the strike, Escondida was expected to produce close to 1.3 million tonnes of copper in 2006, about the same as it did in 2005. That is roughly 3,500 tonnes of copper a day.

Copper futures in New York opened lower Monday but prices received a slight boost as the Escondida strike started.

More than 2,000 union workers were to take part in the strike at Escondida after negotiations for a new wage contract failed even after government mediation.

Union Secretary Pedro Marin said the workers would also march in Antofagasta, the major city in the mining region, to press their demands for a better wage deal.

He expected to draw support from others who use the city as a base and work in other mines in the region.

Chile is the world's largest copper producer and host to many international miners.

Marin said the union planned to employ noisy tactics like the ones used by Chilean students in nationwide protests in June. Those strikes ended in sometimes violent clashes with police.

Nearly 1 million Chilean students took part in nationwide strikes in early June as they demanded more education funding in destructive marches in the capital Santiago.

Escondida miners reject BHP Billiton pay offer

Workers at the world's largest copper mine in Chile have rejected an offer from owner BHP Billiton and have said they anticipate a walk-out that could last a month.

The workers late Monday (local time) refused to vote on a proposal from the Anglo-Australian resources giant put forward on Friday, leaving the mine's production at less than half of normal.

In a meeting of nearly 2,000 workers, the miners decided the 3 per cent wage hike plus $US16,000 per-worker bonus the company offered was not enough, union spokesman Pedro Marin said.

They are seeking a 13 per cent pay increase and a $US30,000 payment per miner, he said.

The strike began Monday (local time), jeopardising 8 per cent of global copper production and spurring prices to a three-week high.

The mine's main customers are Japan, Germany, Canada, China, Sweden, Brazil, South Korea and France.

Miners say their demands reflect a tripling in global copper prices since the previous collective bargaining agreement reached three years ago.

Escondida produces on average 125,000 tonnes of copper per year, nearly 20 per cent of total production in Chile, the world's largest copper producer.

-AFP

Mineweb - 09-AUG-06 - By: Dorothy Kosich

Labor strife could impact up to 16% of copper supplies


As BHP Billiton declared force majeure Tuesday for copper concentrate delivery and suspended cathode production at the world's largest copper mine, Escondida's reduced production--if compounded by additional labor strife at other copper mines--could result in the loss of 16% of the world's copper mine production this year.


Meanwhile, Japanese and Chinese metals smelter companies said Tuesday that it's too early to determine the impact of the Escondida mine strike in Chile on copper concentrate smelting. The workers at the world's largest copper mine Tuesday predicted their walkout could last as long as a month.

Sydney-based Commodities Analyst Alan Heap of Citigroup said the "copper industry has been plagued by union disputes for months now, as minesite workers seek a greater share in their booming sector." In fact, Heap declared that he expects more of the same this month as 2,000 workers at Escondida went on strike this week and their Peruvian colleagues at Antamina want an 18% wage increase. Miners at British Columbia's Highland Valley copper mine are expecting a "generous September contract renewal,"" he added.

Managers at Falconbridge's Lomas Bayas copper mine in Chile averted a strike last May with a deal that included an 8 % pay raise and $4,400 individual worker bonus payment. The FMC union, which represents the striking miners at Escondida, is asking for a 13% pay raise and a $30,000 net bonus per workers. Union Secretary Pedro Marin said Chile's copper companies will have combined profits of $19.15 billion this year. Meanwhile the copper price has risen from 67-cents when the last wage contract was negotiated in 2003 to $3.50 per pound.

Later this year, the world's largest copper miner state-owned Codelco of Chile will have salary negotiations with its own workforce. The Escondida walkout is believed to be influencing the future of the Codelco talks as the Chilean Government scrutinizes BHP's responses to the labor dispute.

Last month, Mexico's Grupo Mexico fired around 2,000 workers at its La Caridad copper mine in the Sonora State in the wake of a strike to protest the firing of a union chief, which began in March. Meanwhile, managers at the Konkola copper/cobalt mine in Zambia agreed to a 20% hike in wages in July. The mine is a joint venture between U.K.-based Vedanta Resources and the Zambian Government.

Heap said that "it's not surprising that copper's price is sensitive to this news. These strike-bound operations alone represent 2.2MTpy of copper-producing capacity or 16% of the forecast mine production in 2006." He estimated that year-to-date total contained metal production lost to strike action stands at 79k without considering loses caused by equipment failures and material shortages.

Heap said that Japan's smelters are most vulnerable to the Escondida strike since they depend on 70% of the Chilean copper mine's annual output. Escondida produces roughly 20% of Chile's total annual production. The company's products are shipped to Japan, Germany, Canada, China, Sweden, Brazil, South Korea and France.

Reuters reported that officials of both Japanese and Chinese metals smelting companies expected a prolonged strike at Escondida, but explained it was too early to determine its impact on their production. Japanese smelters are believed to hold about one month's worth of copper concentrate inventories, according to sources quoted by Reuters.

Copper is used in electrical, electronic, and other applications, as well as transportation systems, housing, commercial construction and appliances. The base metal is used in plumbing, automobile, trains and planes, and most other machinery that uses electricity or has water flowing through its engines. The average American home has at least 30 to 40 motors that rely on copper wires inside the motor.

A force majeure is a contract clause that releases a company from its contractual obligations due to an extraordinary event beyond its control.

BHP Says It Wants Agreement With Striking Chile Copper Workers

Aug. 10 (Bloomberg) -- BHP Billiton, the world's largest mining company, said it wants to reach an agreement with the union at its Escondida mine in Chile to settle a strike that cut copper output.

Road blocks laid by workers earlier in the week at the mine, the world's largest copper supplier, have been cleared, said Emma Meade, a spokeswoman at Melbourne-based BHP Billiton., Pedro Marin, the union's spokesman, yesterday said BHP Billiton hadn't offered a new wage proposal to workers in meetings this week.

``We are committed to continuing discussions with the union to reach a mutually agreeable outcome,'' BHP's Meade said in an e-mail.

The strike this week at the northern Chilean mine helped drive up copper prices in New York and London. BHP Billiton, the world's largest mining company, has said the labor dispute may disrupt deliveries of copper concentrate, which usually contains about a third copper.

MCX expecting three-fold jump in daily turnover


Ludhiana, Aug 09, 2006 (Asia Pulse Data Source via COMTEX) -- Enthused by the growing participation of traders and users in metal trading, the Multi Commodity Exchange (MCX) of India Limited is anticipating more than a three-fold increase in the per day value of trading and volume of metals traded by the end of this fiscal.

"With more and more traders and users of non-ferrous metals participating in metal trading, we expect that the daily trading and volume of metals, including copper, zinc and aluminum will increase over three times against present position by the end of this financial year," MCX, Manager (Product Knowledge Management), Ankit Singhal told PTI here.

Singhal was here to attend a seminar on metal trading.

At present, the per day turnover (single sided) of copper, zinc and aluminum in MCX stands at Rs 900 crore, Rs 150 crore and Rs 50 crore respectively. But the exchange expects daily turnover of Rs 3,000 crore in copper, Rs 400 crore in zinc and Rs 200 crore in aluminum by the end of this fiscal.

Similarly, it hopes that the per day volume size should jump to 50,000 MT in copper, 20,000 MT in zinc and 4,000 MT in aluminum.

The commodity exchange expects maximum participation in metal trading from Maharashtra, Delhi, Gujarat, Punjab and Madhya Pradesh.

The MCX has also tied up with Comex (New York based exchange) for copper and London Metal Exchange (LME) for other metal commodities for sharing expertise and knowledge in the trading.

Copper in London Rises to 3-Week High on Chile Strike Concern

Aug. 10 (Bloomberg) -- Copper prices in London rose to their highest in more than three weeks amid concern that supply growth may lag demand because of a strike at Chile's Escondida, the world's largest mine.

Union leaders at the mine, which supplied 8.5 percent of global mined copper last year, shelved talks yesterday after the lack of progress at a meeting a day earlier. BHP Billiton, which owns a controlling stake in Escondida, will meet the union today at 5 p.m. local time. BHP has said it may stop deliveries to smelters in Asia and Europe because of the stoppage.

``It looks like the strike's impact to production at the mine may be quite big'' as negotiations are still inconclusive, Yuan Fang, a metal futures trader at Shanghai Dongya Futures Co., said by phone today.

Copper for three-month delivery rose as much as $70, or 0.9 percent, to $8,100 a metric ton on the London Metal Exchange, the highest since July 17. The metal traded at $8,082 at 12:16 p.m. Singapore time.

Metal for delivery in October rose as much as 2,560 yuan, or 3.8 percent, to 70,250 yuan ($8,818) a metric ton on the Shanghai Futures Exchange. It traded at 70,020 yuan by midday break at 11:30 a.m. local time.

Pedro Marin, a union spokesman at Escondida, said leaders are evaluating whether to return to the negotiating table. ``We don't want more of the same,'' he said yesterday by phone from the city of Antofagasta.

``We are committed to continuing discussions with the union to reach a mutually agreeable outcome,'' Emma Meade, a spokeswoman at BHP Billiton in Melbourne, said in an e-mail today. BHP Billiton, the world's largest mining company, offered a rise of 3 percentage points above the inflation rate compared with workers' demands for a gain of 13 percentage points.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 2.9 percent to 69,900 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Copper for delivery in September rose 1.5 cents, or 0.4 percent, to $3.725 a pound on the Comex division of the New York Mercantile Exchange at 12:08 p.m. Singapore time in after-hours trading.

BHP Says Chile Copper Stockpiles Are Low, Talking to Customers

Aug. 10 (Bloomberg) -- BHP Billiton said copper concentrate stockpiles at its Coloso port in Chile are ``very low'' and was talking to customers about deliveries after a strike at the world's largest copper mine stretched to a fourth day.

Supplies from the Escondida mine, which is operating at 40 percent capacity, are running down, Emma Meade, a spokeswoman for the Melbourne-based company said today.

The strike at the northern Chilean mine is helping drive up copper prices in New York and London. BHP Billiton, which owns 57.5 percent of the mine, has said the dispute may disrupt deliveries of copper concentrate, which usually contains about a third copper.

``With concentrate, the stockpiles at Coloso are actually very low,'' Meade said. ``We're running at 40 percent and we just need to talk to them about how we meet their requirements going forward. We're just going to be able to ship what we produce.''

Shares in BHP Billiton, the world's largest mining company, fell as much as 31 cents, or 1.1 percent, to A$26.92 on the Australian Stock Exchange. They traded at A$27.22 at 3:15 p.m. Sydney time.

Mine management and labor union workers are meeting again to discuss workers wage claim today after talks were postponed yesterday, Meade said.

``We are committed to continuing discussions with the union to reach a mutually agreeable outcome,'' BHP's Meade said in an e-mail.

Road blocks laid by workers earlier in the week at the mine were cleared. Pedro Marin, the union's spokesman, yesterday said BHP Billiton hadn't offered a new wage proposal to workers this week.

AFX - 14 August 2006


SEOUL (XFN-ASIA) - The world's fifth largest steel maker, POSCO, has rejected reports it is having trouble covering nickel short positions on the London Metal Exchange (LME) and is being forced to roll them forward at increasingly greater expense.

'It is a groundless market rumor,' a POSCO spokesperson said. Nickel is a key ingredient for making stainless steel.

Earlier The Wall Street Journal reported that POSCO, was short by 10,000 tons of nickel against its LME positions, having bet prices would fall. Prices though, as a result of strong demand from stainless-steel producers, have been on an upward trend this year.

'It makes no sense. The positions for POSCO to cover is less than 1,000 tonnes -- a futures deal traded in April,' the POSCO spokesperson said.

The POSCO official also rejected the report's claim that POSCO was some 20,000 tons short on the physical nickel market, after it underbought against its customer requirements.

'POSCO, a steel maker, is the very consumer, not a speculator, of nickel. Most of its demand is supplied by long-term contracts,' the official said.

The report said although the price at which POSCO went short, or bet that the price would fall, isn't known, to buy 30,000 tons of nickel on the LME and physical market currently would cost at least 810 mln usd based on an LME price of 27,000 usd a ton. In London Friday, nickel for delivery in three months time closed at 26,600 usd a ton on Friday.

Reuters - 14/08/2006 13:42

Copper higher on supply upsets


London - Copper prices rallied on Monday as supply started to get tighter in the biggest consumer of the metal and as a strike at the world's largest copper mine moved into a second week.

"Metals are consolidating just below recent peaks on supply disruptions," UBS analyst Robin Bhar said.

London Metal Exchange (LME) copper was up $100 at $7 670/7 690 a tonne at 09:40 GMT, completing its recovery from the 4% loss seen at one point on Friday after talks resumed at the key Escondida mine in Chile between the union and majority owner BHP Billiton.

The union's president said on Sunday that talks might last another week at the mine, which accounts for 8% of the world's copper output.

Copper hit a record $8 800/tonne in May.

In China, which consumes a fifth of the world's copper, recent sales of metal by Beijing's State Reserves Bureau had been weighing on futures prices in Shanghai and London, sharply reducing the country's imports and encouraging exports.

But that selling programme may now be reaching its conclusion.

"The SRB was looking to sell 100 000 tonnes of copper this year. They look to have sold 60 000 to 80 000 tonnes. Those sales have depressed the local market to the point where it was not worthwhile importing copper," Bhar said.

"But as those sales dry up, local prices could pick up again and encourage more Chinese imports," he added.

Dealers noted that with the exception of the soon-to-expire August contract, prices for nearby Chinese copper futures were now above prices for material for delivery further in the future, known as backwardation.

"The gap between Shanghai and the LME is narrowing again. You can see it most clearly when the LME tanks and Shanghai doesn't fall as much," a futures trader at a Chinese copper producer said.

Nickel prices also rose, with three-month futures at $26 850/27 000, versus $26 700 and holding short of last week's record $27 300.

South Korean steel producer Posco Co Ltd on Monday dismissed a Wall Street Journal report that it held a loss-making short position of 10 000 tonnes of nickel on the LME and of an additional 20 000 tonnes in the physical market.

A Posco official said the company was short by less than 1 000 tonnes on the LME, and denied the company had speculated on falling nickel prices.

Stocks of nickel in LME warehouses were 5 940 tonnes, of which nearly 3 600 tonnes have already been earmarked for delivery. Daily world nickel consumption is around 3 500 tonnes.

"Nickel availability should improve but in the near term the market looks to remain very tight," a London trader said.

In addition to low stocks and strong demand from stainless steel makers, nickel prices are firm after a strike at Inco, which began shutting down production at the end of July at its 54 000 tonne-per-year, Voisey's Bay nickel mine in Canada.

Aluminium was up $10 at $2 530/ ,535 and zinc gained $30 at $3 290/3 320.

COMEX copper ends near highs amid spread dealings

NEW YORK, Aug 14 (Reuters) - Copper futures in New York ended near their session highs in extremely thin dealings on Monday, as traders focused on the September/December roll while uncertainty over the outcome of the Escondida labor strike held the buyers at bay, sources said.

"Last week, we started our roll from September into December, and while the bulk of it was done last week, some people may have anticipated some more selling to start the week, but when it never materialized and they turned buyers of the spread later in the day, one COMEX floor dealer said.

Copper Rises for 2nd Day in London; Aluminum and Nickel Gain

Aug. 15 (Bloomberg) -- Copper rose for the second consecutive day on the London Metal Exchange. Aluminum and also gained, while nickel matched its all-time high.

Copper for delivery in three months on the LME increased $90.50, or 1.2 percent, to $7,740 a metric ton as of 10:14 a.m. local time. Nickel increased $150 to $27,250 a ton, after earlier trading as high as $27,300, equaling the record set Aug. 11. Aluminum gained $26 to $2,507.

Tuesday August 15

Broker snap: Miners a mixed bag

LONDON (ShareCast) - The mining sector was given a knock today after Lehman Brothers issued a mixed note on the industry, trimming forecasts across the board.

The broker reduced its earnings estimates on BHP Billiton , Rio Tinto, Xstrata and Anglo American, arguing that high commodity prices will offer investors little upside going forward.

Lehman suggests that with a number commodity prices trading near record highs, investors should move their attention from high-risk stocks such as Vedanta to low-risk miners such as Rio Tinto.

The broker kept its "overweight" recommendation on Rio Tinto, BHP Billiton and Xstrata but said Vedanta remains "equal-weight" and Anglo American "underweight".

Aug 15, 2006 (TradeSignals via COMTEX) -- Copper:

Copper trade on ACCESS is showing weaker prices in recent activity reversing the firmer tone seen during the prior session. Trend indicators are indicating a bearish market. However the overall strength of the trend, as indicated by the ADX, is weak and should be watched as a result. Momentum readings are also in bearish territory.


Simple Moving Average (10-Day): Recent activity this morning has seen prices trade below this moving average. Also, the slope of the moving average is in a downward slope from the previous session indicating further weakness. As a result the 10-Day simple moving average has a strong bearish bias.


Simple Moving Average (25-Day): Recent activity this morning has seen prices trade below this moving average. Also, the slope of the moving average is in a downward slope from the previous session indicating further weakness. As a result the 25-Day simple moving average has a strong bearish bias.

Aug. 16 (Bloomberg) - Copper Declines in Shanghai on Expectations Escondida Strike May Soon End

Copper fell in Shanghai for the fourth day on expectations that a strike at Escondida, the world's biggest copper mine, may end soon.

BHP Billiton, the world's biggest mining company, and a union in Chile yesterday met for the first time this week seeking to resolve the stoppage, which has slashed production at the site. The two sides discussed vacation and educational benefits, union President Luis Troncoso said yesterday.

``It looks like the talks are going on rather smoothly,'' Yuan Fang, a metal futures trader at Shanghai Dongya Futures Co., said by phone today. ``Given the lack of market news, people are trading on the back of these negotiations.''

Metal for delivery in October fell as much as 530 yuan, or 0.8 percent, to 67,100 yuan ($8,389) a metric ton on the Shanghai Futures Exchange. It traded at 67,480 yuan at 9:30 a.m. local time.

Copper for delivery in December fell 2.4 cents, or 0.7 percent, to $3.4655 a pound in after-hours trade on the Comex division of the New York Mercantile Exchange at 9:29 a.m. Singapore time.

``There is progress,'' Troncoso said by telephone from the city of Antofagasta. ``We will keep talking.''

The company's refusal to meet demands to raise wages by 13 percentage points above inflation, which reached 3.8 percent annually in July, and pay a bonus of 16 million pesos ($29,575) per worker led to the strike, which began Aug. 7.

The walkout cut processing capacity at Escondida by about half, BHP Billiton spokesman Mauro Valdes said yesterday by telephone. The mine, located in northern Chile, accounted for 8.5 percent of all mined copper worldwide last year.

`` I'm encouraged that there is dialogue,'' David Thurtell, a metals analyst at BNP Paribas in London, said. ``At least the talks haven't broken down. That's slightly on the bearish side.''

Copper for three-month delivery on the London Metal Exchange rose $10, or 0.1 percent, to $7,660 a ton at 9:31 a.m. Singapore time.

Copper, Zinc Prices Tumble on Speculation Demand May Slow

Aug. 17 (Bloomberg) -- Copper prices fell the most in a month and zinc tumbled almost 6 percent on signs U.S. economic growth will continue to slow, curbing demand for metals.

Before today, copper had jumped 75 percent this year, partly because of supply disruptions in China, Indonesia and Mexico. The U.S. index of leading economic indicators unexpectedly dropped in July, the New York-based Conference Board said today. That marked the third report this week to show expansion is cooling. Lead, aluminum and nickel also dropped.

``It's a commodity-wide sell-off,'' said Robin Bhar, an analyst at UBS AG in London. ``Fears of a U.S.-led slowdown'' triggered the drop, he said.

Copper for delivery in three months declined $410, or 5.3 percent, to $7,290 a metric ton on the London Metal Exchange, the biggest percentage decline since July 20. Prices still have doubled in the past year. The U.S. is the world's second-biggest copper consumer behind China.

Zinc dropped $199, or 5.9 percent, to $3,201 a ton in London. Prices are up 68 percent this year.

Copper futures for December delivery fell 10.70 cents, or 3.1 percent, to $3.320 a pound on the Comex division of the New York Mercantile Exchange, the lowest since late June.

Speculation that a strike may end soon at the world's biggest copper mine in Chile helped drive prices lower.

The union at the Escondida mine is holding talks with management today to settle the 11-day stoppage.

Workers are seeking a wage increase 10 points above Chile's inflation rate, down from the 13 points above inflation it wanted as recently as yesterday.

Closer to Agreement

``They are closer rather than further away to coming to an agreement,'' said Mark Liinamaa, a metals analyst with Morgan Stanley in New York. ``It's really conciliatory over there. The situation is looking much more approachable to a settlement in the near term.''

BHP Billiton Ltd., which owns more than 57 percent of the mine, can reallocate funds within its salary offer, though it won't increase the value of the package, Illtud Harri, a spokesman for the company in London, said today.

Management also has offered to pay a bonus of 8.5 million pesos ($16,032) per worker. Escondida's Workers' Union No. 1 wants a bonus of 16 million pesos along with the wage increase tied to the rate of inflation, which was an annual 3.8 percent in July.

The strike has cut output by half at Escondida, which produced 8.5 percent of copper from mines worldwide last year. The stoppage is costing the mine as much as $16 million a day in lost profit on average, mine management said yesterday.

``For most of the metals, it's the supply side of the equation that I think is going to be most important to determine price movement from here,'' Liinamaa said.

Industrial Production Slips

Industrial production in the U.S. grew less than forecast in July, a government report showed yesterday. Housing starts fell 2.5 percent to an annual rate of 1.795 million, and building permits declined 6.5 percent, the most since September 1999, the U.S. Commerce Department said in a separate report.

Builders are the biggest users of copper in the U.S, accounting for about 40 percent of demand. An average single-family home contains about 400 pounds of the metal, according to the Copper Development Association.

Today's report is ``suggesting that together with yesterday's weak housing numbers, the U.S. economy is slowing,'' Bhar said.

Lead price in London dropped $42, or 3.4 percent, to $1,185 a ton. Nickel tumbled $1,400, or 4.8 percent, to $27,700. Aluminum declined $41, or 1.6 percent, to $2,460.

DJ Comex Copper Review: Lower On Escondida Strike Rumors

NEW YORK (Dow Jones)--A nervous tone continued to dominate the Comex copper
market as futures prices dipped sharply lower Thursday amid speculation the
11-day strike at Chile's Escondida copper mine ended, despite reports to the
contrary.

At settlement on the New York Mercantile Exchange, Sept. copper is down 11.25
cents at $3.3575 per pound. During the session speculation began to mount that
the strike at Escondida had ended. The talk took the Sept. contract down to a
$3.29 low - its lowest level since July 24.

But soon after the quick sell-off, news from Santiago quoted union leaders as
saying that any strike settlement was days away.

"I want to be very clear about this: The only problem we have (with the
company) happens when we reach the subject of the wage increase," union
president Luis Troncoso told reporters Thursday following a meeting with other
union leaders in the industry.

"The talks have a few more days to go," Troncoso said, adding that Escondida
negotiators have sought to leave the sticking points, such as salaries and
bonuses, to the last possible moment.

Traders at Triland Metals said it appears the union has been making some
concessions and that the market apparently has priced in a settlement within
this week.

They added that U.S. leading indicators showed a drop of 0.1% Thursday,
putting some pressure on the entire metals sector.

"Buying interest was limited and prices dropped below the 100 day moving
average (seen at $3.2929) at one point before recovering on some closing based
orders," the traders said in a report.

Reuters - Fri Aug 18, 2006 12:43 PM - By Nick Trevethan

Copper rises on Escondida mine closure


LONDON (Reuters) - Copper prices bounced in London on Friday after the world's largest copper mine said it was suspending operations as talks with striking workers collapsed.

Copper for delivery in three months traded at $7,470 a tonne at 1001 GMT, versus $7,290 at the close of trade on Thursday.

Copper has recovered over half of Thursday's more than five percent drop after BHP Billiton said it was closing its Escondida copper mine in Chile because workers had blocked access roads to the mine for two days and had put at risk the health and security of people working there.

"We will not negotiate while the union carries out this illegal activity and will be taking legal action to resolve this," a BHP Billiton spokesman said.

Escondida, which churns out eight percent of the world's copper, had been operating at around half speed due to the 12-day strike over pay and bonuses.

"There is a strong element of brinkmanship going on. I don't know what BHP Billiton's negotiating objectives are, but it seems it wants to transfer commodity price risk to the workforce," an LME dealer said.

The union is holding out for a $30,000 special bonus for each worker and a 10 percent raise, citing $2.9 billion net profit at Escondida in the first half of the year. BHP has responded with an offer of 3 percent above inflation and a bonus of around $16,000.

"The pay award will set a benchmark for other labour settlements so there is a question about how much encouragement BHP is getting to take a tough stance from other producers, including government-owned Codelco," the trader said.

Copper Rises as BHP Closes Chile's Escondida, World's Top Mine

Aug. 18 (Bloomberg) -- Copper prices rose after BHP Billiton shut down the world's biggest copper mine and called off talks with a striking labor union as workers blockaded roads to the Escondida site in Chile.

BHP Billiton, the world's largest miner, will take legal action against the union over the obstruction, spokeswoman Emma Meade said. The escalation of the dispute may intensify concern that global copper production can't meet demand. Escondida accounts for 7 percent of global copper usage, based on its first-half output, according to Numis Securities in London.

``There are indications that this could go on for much longer than the market expected,'' said Peter Hickson, global commodities strategist for basic materials at UBS AG in London. The strike may have ``far more impact on what is already a very short copper market.''

Copper for delivery in three months on the London Metal Exchange rose $140, or 1.9 percent, to $7,430 a metric ton as of 1:30 p.m. local time, after earlier rising 3.3 percent to $7,530. The metal, used in wiring and plumbing, has more than doubled in the past year. It rose to a record $8,800 on May 11.

Copper futures for September delivery on the Comex division of the New York Mercantile Exchange gained 4.5 cents, or 1.4 percent, to $3.36 a pound. Prices were down 1.7 percent for the week in New York and 1.3 percent in London. A futures contract is an obligation to sell or buy a commodity at a fixed price for a specific delivery date.

Metals briefly pared gains after China, the world's biggest consumer of copper, raised its benchmark lending and deposit rates to curb an investment boom that the government says threatens to fan inflation and leave the nation with surplus manufacturing capacity.


`Far Apart'

The stoppage at Escondida doesn't constitute a lockout and management wants to resume production ``as early as possible,'' BHP Billiton said. The strike started Aug. 7. Before the mine's closure, production had fallen by about half.

Escondida's Workers' Union No. 1 wants wages increased by 10 percentage points above inflation, which was 3.8 percent annually in July, having reduced an initial demand for a 13- point wage increase. Union leaders have said workers' wages need to reflect the surge in copper prices. BHP has offered a rise of 3 percentage points above inflation.

``Escondida management and the union remain far apart in terms of negotiations,'' said Simon Toyne, an analyst at Numis. ``For all other copper players, Escondida striking is clearly advantageous in the short term.''

The Age' - August 18, 2006 - 4:10PM


BHP Billiton Ltd has closed operations at the world's biggest copper mine and called-off talks with striking workers, sending copper prices soaring.

The world's largest diversified miner said it will abandon the talks in favour of legal action against the workers, who are seeking a larger share of the benefits of spiralling copper prices.

BHP Billiton is due to break its Australian corporate earnings record and post an annual net profit of $US10 billion ($A13.16 billion) when it reports on Wednesday, helped in part by a record annual copper production.

BHP Billiton says workers have blocked all access roads to the Escondida mine, located in Chile's Atacama Desert.

"This heightened union activity means we no longer feel that we are able to unequivocally guarantee the health and safety of our people or the integrity of the operations, infrastructure," said spokeswoman Emma Meade.

"As a result, Minera Escondida has closed its operations and ceased negotiations with the union."

BHP Billiton said it will not negotiate with the union while it is carrying out "illegal activity".

"We will be taking legal action against the union to resolve this," Ms Meade said.

"We will only reopen the operations and restart negotiations when we are comfortable that we can guarantee the health and safety of our people and the integrity of the operations."

The news sent copper prices up by $US160 a tonne.

London Metal Exchange three-month copper futures rose to US7,450 in after hours trading, from to $US7,290 at London close on Thursday.

BHP Billiton said earlier this month that the strike action over pay at Escondida, the largest copper mine in the world, had slashed operating capacity to 40 per cent.

Suspension of cathode production also led to the mining giant declaring a force majeure on its copper concentrate contracts.

A force majeure is a contract clause that would free it from its contractual obligations due to an extraordinary event beyond its control.

Of the mine's 2,930 permanent staff, 2,052 are union members.

Earlier this month workers rejected an offer of three-year contracts including a three per cent rise in pay and bonuses.

It was an improvement over an earlier offer for a 1.5 per cent raise, along with a bonus and low-interest loans, but fell substantially short of a 13 per cent raise and $US30,000 ($A39,408.87) net bonus per worker the union was seeking.

FT.COM -By Chris Flood - August 18 2006 18:20

Copper surges as BHP shuts Escondida


Copper dipped 1.2 per cent over the week to $7,480 a tonne. However a breakdown in negotiations Escondida, in Chile pushed copper 2.6 per cent higher yesterday. Talks between the union and management have broken down and operations at the worlds largest copper mine have been suspended. An estimated 26,000 tonnes of copper production has been lost due to the strike. This has been covered by drawing down from existing stockpiles but shipments are expected to be affected shortly. As LME stocks of refined copper are low and the market remains in a supply deficit, the impact of a prolonged strike could be significant.

The Times - August 19, 2006 - By Carl Mortished, International Business Editor

Copper rises as strikers' blockade forces BHP to shut Chilean mine


STRIKING miners have blocked access to Escondida, the worlds largest copper mine, forcing its operator, BHP Billiton, to stop production and raising the temperature further in a heated metals market.

The shutdown of Escondida, which accounts for 8 per cent of the worlds copper output, pushed up the price of the red metal by $180 per tonne to $7,470 on the London Metal Exchange. Chiles President, Michelle Bachelet, called for talks to resume between the miner and the unions, who are demanding a substantial pay rise and bonuses to reflect the huge profits earned from high copper prices.

In London, the price of nickel gained $300 per tonne as volumes in LME warehouses dwindled further. Chinas largest nickel producer expressed concern that the nickel market was being distorted by speculators and urged the LME to improve regulation.

The LME is no longer a place for fair dealing metals but a paradise of speculation, said Li Yongjun, chairman of Jinchuan Group, the largest nickel producer in China.

Nickel reached a record high of $29,200 per tonne in the forward market as stocks plummeted to less than a days supply. The premium for cash nickel over three-month delivery widened to almost $5,000 per tonne, prompting the LME to introduce emergency rules on Wednesday to allow short sellers to escape the squeeze.

BHPs tough stance with the Escondida strikers may be supported by the Chilean Government, reckoned some analysts, as Escondida pays its workforce the highest mining wages in Chile, and the state copper company, Codelco, will be anxious to avoid a high settlement with its own workers. They wont want to see BHP set a precedent and stoke higher wage claims at Codelco, said Robin Bhar, metals strategist at UBS.

BHP said that it had shut the mine for safety reasons but Pedro Marin, a spokesman for the strikers, accused BHP of trying to scare the workforce. This is illegal pressure, he said.

BHP would not put a timescale on the stoppage, which follows 12 days of reduced output since the strike began. BHP is offering a 3 per cent pay rise plus a bonus of $16,000 (8,500) to each of the mines 2,900 workers. The union, which represents 2,050 miners, is demanding a 13 per cent pay increase and a $30,000 bonus.

The global mining industry is suffering a wave of labour unrest as workers seek to extract their share of exceptional profits from high metal prices.

Associated Press - 08.18.2006, 11:56 PM

Chile Copper Mine Talks to Resume


Workers and management at the world's largest privately owned copper mine agreed Friday to resume talks aimed at ending a 12-day strike.

The agreement was reached in a government-mediated meeting ordered by President Michelle Bachelet. It includes a promise by the workers "to maintain public order," said Julio Manque, who represents the labor ministry in the northern region where the Escondida mine is located.

Workers had blocked the entrance to the mine Thursday evening, triggering clashes with police and prompting the company to break off talks and suspend the mine's limited 40 percent production maintained with contract workers.

On Friday, company representative Pedro Correa said that activity at the mine will resume "but the process takes a while."

President of the workers' union, Luis Troncoso, said he expects an agreement can be reached by Tuesday.

Friday's decision came just hours after Bachelet ordered the labor ministry to offer the government's help to get both parties to talk again. Labor laws do not permit formal mediation by the government.

The Escondida mine, 1,000 miles north of Santiago, produces about 4 tons of copper a day, or 8 percent of world output. Company executives have estimated daily losses from the strike at $16 million.

The 2,052-member union's demand for an across-the-board wage increase was the main hurdle in the talks, Troncoso has said. The workers' original demand for a 13 percent increase was reduced Thursday to 10 percent, but the company has offered 3 percent.

The workers are also demanding a $26,900 end-of-conflict bonus, but the company has offered half that amount, plus low interest loans.

Talks for a new contract also included health and education benefits.

The Australian-British consortium BHP Billiton PLC owns 57.5 percent of the mine, while Rio Tinto PLC, also Australian-British, holds 30 percent, and the Mitsubishi Corp.-led Japanese consortium 10 percent.

Mining Weekly - 21 august 2006

BHP Chile copper mine workers reject new wage offer


Striking workers at the world's largest copper mine rejected a revised pay offer from BHP Billiton, extending a two-week strike in Chile that has cut production by as much as 60%.

The world's biggest mining company is offering more pay and higher bonuses, BHP Billiton spokeswoman Alejandra Wood said from Santiago. The 2 052 workers in the mine's main labor union decided the offer wasn't enough at a meeting late yesterday in Chile, union spokesman Francisco Aedo said.

Prices of copper, used in wires and pipes, have more than doubled in the past year as consumption soared in China, prompting unions to seek a greater share of mining companies' record profits. Mine management said August 16 the dispute was costing owners including BHP Billiton, Rio Tinto Group and Mitsubishi Corp. $16-million in profit a day.

The strike looks like it's going to go on longer than people expected, and in the short-term that's good for copper prices, said Ron Cameron, a resources analyst at Ord Minnett Ltd. in Sydney. They will have to reach a compromise at some stage.

Copper for delivery in October rose as much as 310 yuan, or 0,5%, to 66 7000 yuan ($8 370) a metric ton on the Shanghai Futures Exchange. It traded at 66 520 at 11:30 a.m. local time. It had fallen as much as 0,9% after BHP raised its pay offer.

Shares of BHP Billiton, which owns 57,5% of the mine, rose as much as 40 cents, or 1,4%, to A$28,50 on the Australian Stock Exchange. They traded at A$28,45 at 2:22 p.m. in Sydney. Shares in Rio Tinto, which owns 30%, fell 6 cents to A$75,19. Shares in Mitsubishi fell 0,8% to 2 425 yen in Tokyo.

The company has directed these talks poorly, said Pedro Marin, another union spokesman, in a phone interview from Antofagasta.

BHP Billiton raised its offer to a wage increase of 4 percentage points above inflation, 1 percentage point higher than previously offered, and a bonus of as much as 9,5% pesos ($17,834) for a 36-months contract. If workers sign a 48-months contract, BHP Billiton will raise pay by 1,3% in the fourth year, and pay a total bonus of 13-million pesos.

The Escondida's Workers Union No. 1, which represents 94% of the mine's employees, is seeking a wage increase of 10 percentage points above inflation and a bonus of 16-million pesos ($30,036) per worker for a 36 months contract. Chile's inflation rate was 3,8% in July.

The 4 percent offer wasn't large enough, Marin said. He added that the union was prepared to negotiate on its demand for a 10 percentage points above inflation. He also said the union isn't willing to agree to a four-year contract.

The workers could be in a precarious position if they reject this new offer, said Mark Pervan, head of research at Daiwa Securities SMBC in Melbourne. When you're dealing with a company that's this large and a tough negotiator, this is a good offer.

The strike had already cut capacity at the mine to between 40% and 60%, and led BHP Billiton on Aug. 8 to say it may stop delivery of copper concentrate, which is smelted in refineries to make the metal, to customers in Asia and Europe because of the strike.

The remaining share of the Escondida mine is held by the International Finance Corp. Escondida accounted for 8,5% of all mined copper worldwide last year.

Mon Aug 21, 2006 9:10 AM BST148

Xstrata not looking at bid for Anglo


LONDON, Aug 21 (Reuters) - Swiss-based Xstrata was not looking at taking part in a possible bid for miner Anglo American, a source familiar with the situation said on Monday, denying a newspaper report.

"Xstrata have just bought Falconbridge and are focused on integrating that so they would not be thinking of biting something off as big as that (Anglo)," the source told Reuters.

The Observer newspaper said on Sunday, citing unidentified sources in London, that Xstrata, Brazil's CVRD and Rio Tinto were looking at a possible bid to break up Anglo American and had hired financial advisers.

The source said Xstrata had not hired financial advisers.

Xstrata declined to comment on the report.

TradeSignals Copper Futures Morning Commentary

Aug 21, 2006 (TradeSignals via COMTEX) -- Copper:


Copper trade on ACCESS is showing higher prices in recent activity reversing the weaker tone seen during the prior session. Trend indicators are indicating a bearish market and the overall strength of the trend is strong, as indicated by the ADX. Momentum readings are also in bearish territory.


TREND INDICATORS:

Simple Moving Average (10-Day): Recent activity this morning has seen prices trade below this moving average. Also, the slope of the moving average is in a downward slope from the previous session indicating further weakness. As a result the 10-Day simple moving average has a strong bearish bias.

Simple Moving Average (25-Day): Recent activity this morning has seen prices trade below this moving average. Also, the slope of the moving average is in a downward slope from the previous session indicating further weakness. As a result the 25-Day simple moving average has a strong bearish bias.

Simple Moving Average (50-Day): Recent activity this morning has seen prices cross above this moving average. However, despite prices trading above the moving average line, the moving average is in a downward slope from the previous session. If prices trade below the moving average then the trend will be clearly established as up. However, this strength in the price will need to be watched. As a result the 50-Day simple moving average has a weak bearish bias.


ADX: The Average Directional Change (ADX) indicates the strength of a markets underlying trend. A rising ADX is interpreted as building trend strength, while a falling ADX indicates weakness in the underlying trend and the potential of a market reversal. On this market, the 14-Day ADX is rising, while the long term trend, based on a 50-Day moving average, is down. As the ADX is rising this indicates that the current trend is strong and should remain intact. Look for the current trend to continue.

MOMENTUM INDICATORS: MACD: The MACD is in bearish territory.

RSI: The 14-Day RSI is in neutral territory. (RSI is at 46.08). This indicator issues bullish signals when the RSI line dips below the oversold zone (currently set at 20.00); a bearish signal is generated when the RSI rises into the overbought zone (currently set at 80.00). Nevertheless with the RSI at 46.08 the market is somewhat oversold. However, this by itself isn't a strong enough indication to signal a trade. Look for additional evidence of strength from this indicator before getting too bullish here.

VOLATILITY INDICATORS:

Bollinger Bands (20-Day Average +/-1 Standard Deviation): As prices are closer to the bottom band than the top band, the Bollinger Bands are indicating oversold prices. Despite this oversold condition the market may become more oversold before turning higher. As a result, the market will look for additional strength in prices before turning bullish on this indicator.

RESISTANCE AND SUPPORT LEVELS:

3.7700 - Highest High in last 50-Days 3.7435 - Highest High in last 10-Days 3.7038 - 20-Day Simple Moving Average Plus 2 Standard Deviations 3.6156 - 20-Day Simple Moving Average Plus 1 Standard Deviation 3.5350 - 10-Day Simple Moving Average 3.5218 - 25-Day Simple Moving Average 3.4645 - High 3.4390 - 20-Day Simple Moving Average Minus 1 Standard Deviation 3.4345 - Last Price 3.4242 - 50-Day Simple Moving Average 3.4207 - 3-Day Simple Moving Average 3.3510 - Low 3.3508 - 20-Day Simple Moving Average Minus 2 Standard Deviations 3.3342 - 100-Day Simple Moving Average 3.2900 - Lowest Low in last 10-Days 2.9700 - Lowest Low in last 50-Days 2.7209 - 200-Day Simple Moving Average

Marianne Barriaux
Tuesday August 22, 2006
The Guardian

Why this rich seam should last - Booming prices and profits have led to a flurry of takeovers



The mining industry has never had it so good. Soaring commodity prices - nickel hit a record of $29,200 a tonne last week - driven by a shortage of supply and increasing demand have led to bumper profits for big and small mining groups.

The huge amount of cash generated has led to increasingly audacious mergers and acquisitions, as illustrated by Brazil's CVRD, one of the largest miners in the world, which recently launched a C$19.4bn (9.2bn) all-cash bid for the Canadian nickel producer Inco.

Xstrata has also secured its long-awaited acquisition of the Canadian miner Falconbridge for 9bn, after battling it out with Inco, Phelps Dodge and Teck Cominco for the best part of a year. Other companies are now regarded as potential targets. Even Anglo American, the world's third biggest miner, is said to be a target once it demerges its non-core paper and packaging division. In the current cycle of high commodity prices, it seems anything is possible.

Analysts acknowledge that these acquisitions are value enhancing. The integration of Falconbridge, a copper and nickel producer, will catapult Xstrata into the lucrative nickel market. Antofagasta's 211m bid for Equatorial Mining will give it control of the El Tesoro copper mine in Chile, increasing its presence in the global copper market.

But with worldwide demand surpassing worldwide supply, one area of concern remains. Existing operations have been running at full capacity for the past three years, and there is little excess to replace production shortfalls. More importantly, there is a shortage of major new mines coming on stream. The big groups are getting rid of their plentiful cash by returning it to shareholders - Anglo American delighted investors by announcing it would hand back $5bn (2.6bn) to shareholders after bumper results in the first half of the year and BHP Billiton is expected to announce a second share buyback of at least $2bn on Wednesday - but commodity users may well ask why they are not investing more of their excess cash in new projects to address future demand. Admittedly, BHP Billiton, the world's biggest miner, is developing $10bn worth of new projects. But it has forecast it will spend only $600m this year on exploration, and just $160m of that will be spent on mining. In fact, it is much cheaper and easier for a company to take over another valuable operator rather than invest in the exploration and development of a mine, which takes 10 years on average from the first discovery to the first tonne of metal produced.

"Growing organically is getting harder and harder," says Simon Toyne, mining analyst at Numis Securities. "There is a shortage of skilled workers, some of the equipment required, like trucks, can take up to three years to be delivered, and costs and lead times for everything from dynamite to tyres continue to rise."

BHP Billiton, for example, said that costs of the development of the Ravensthorpe nickel mine in Australia had soared 30% to $1.34bn and added it was further reviewing the budget and schedule of the mine.


Digging deeper

Moreover, exploration itself is getting harder. Access to prospective land is often restricted by environmental and community concerns, and miners are talking about the necessity of digging deeper to get at scarce resources - a process that would cost even more.

More importantly, though, miners have learned their lesson. During the 1980s, the mining industry was hit by a copper price boom that led to companies rushing into opening new mines. This in turn led to excessive amounts of copper on the market, a collapse in prices, and many companies were left with unprofitable projects.

In this context, growing acquisitively is more attractive for the bigger mining groups than investing in mines that could prove costly should prices fall. Junior companies are increasingly relied on for exploration, which the majors or mid-tier miners will take over or form a joint venture with. In 2005, according to accountants PricewaterhouseCoopers, the exploration budgets of junior companies accounted for 63% of total growth in exploration expenditure.

Analysts say consolidation is set to continue, but ultimately the level of mergers and acquisitions depends on the level of commodity prices. These in turn hinge on the global economy and demand. China, which accounts for the bulk of new demand, is growing at a rate of about 10% a year, but it could slow down. There are signs that the US economy is running out of steam.

Jason Burkitt, director of PwC's global mining practice, says that companies looking at potential acquisitions need to form their own long-term view rather than look at current prices. "Hedge funds and commodity traders have entered the fray, and any rise or fall is more pronounced. Also, the commodity prices are in US dollars, and the dollar has moved quite a lot."

Charles Kernot, mining analyst at Seymour Pierce, says exploration started increasing significantly only in 2002, which means that new mines will be coming into production around 2012. When that happens, he says, prices will fall. But others, like Mr Toyne, believe demand, and therefore prices, could remain strong for a while. "China continues to grow. Even if GDP growth slows to 7% or 8% per year, annual incremental commodity demand is still substantial relative to the global market. And by the time it comes to the end of its industrialisation phase, India could take over, with GDP/capita just entering the commodity-intensive zone."

He adds that even if copper prices halve, for example, they will still be higher than they were two years ago.

When prices fall, consolidation in the industry will slow down. Those small companies that started developing projects off the back of high commodity prices will be snapped up by mid-tier groups. As for the bigger companies, a slowdown in the cycle will not necessarily mean that costs will drop accordingly, which would lead to a margin squeeze, and an erosion in confidence to make further acquisitions.

Ultimately, though, analysts agree that investors need not worry about their mining stocks in the short and medium term. As PwC says in its annual mining review: "Let the good times roll."


Explainer: Labour unrest

High commodity prices have led to workers seeking a share of the mining companies' profits. As a result, the sector has recently been plagued by industrial unrest with miners striking for higher wages and bonuses.

Workers at the world's largest copper mine, in Escondida, Chile, which is majority-owned by BHP Billiton, have been on strike for two weeks. They are seeking a pay rise of 10 percentage points above inflation and a 15,355 bonus but BHP's latest improved offer was rejected on Sunday night. BHP closed the mine late last week after miners blocked the road to the site but yesterday the company said the mine, which accounts for 8% of world output, was running at about 50% of capacity. Copper is used in the electricity, electronics and construction sectors.

Inco is having to weather a strike at its Voisey's Bay mine in Labrador, Canada, which accounts for about 4% of global nickel output. Workers there are demanding wage parity with other mine workers at Inco mines. Nickel is used mainly in making stainless steel.

Two of Grupo Mexico's mines, Cananea and La Caridad, have been shut by strikes this year, causing mineral production to shrink 0.6% in the second quarter of the year. The company resorted to firing its workers at La Caridad to end the four-month strike, and has said it is re-hiring employees and repairing the damage.

Kumba Resources, the biggest iron-ore miner in South Africa, saw a strike at some of its subsidiaries end earlier this month after it offered an average 8.5% pay rise, as well as a 10% rise in the housing allowance. Iron ore is used for making steel.

Copper Falls; BHP May Replace Striking Chilean Mine Workers

By Katy Watson

Aug. 22 (Bloomberg) -- Copper prices fell as supply concerns eased after BHP Billiton Ltd. said it plans to hire workers to replace striking union members at Chile's Escondida, the world's biggest source of the metal.

Prices have more than doubled in the past year, partly because of supply disruptions. The mine is running at 40 percent to 50 percent of capacity, BHP spokeswoman Alejandra Wood said. Almost 1,900 workers rejected BHP's latest wage offer. Escondida accounted for 8.5 percent of global mining output last year.

``It's bearish for prices if they are going to stump up production,'' said Sean Corrigan, chief investment strategist at Lausanne, Switzerland-based Diapason Commodities Management SA, which overseas about $5 billion in assets.

Copper futures for December delivery fell 1.15 cents, or 0.3 percent, to $3.478 a pound on the Comex division of the New York Mercantile Exchange. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Copper for delivery in three months dropped $30, or 0.4 percent, to $7,620 a metric ton at 6:30 p.m. on the London Metal Exchange. Before today, prices had jumped 75 percent this year.

BHP also invited workers to agree to individual contracts. Chilean law allows strikers to negotiate separately to return to work 15 days after a strike begins. The walkout began Aug. 7.

Escondida's workers are asking for a greater slice of record profit from Melbourne-based BHP Billiton. The company will say tomorrow net income for the six months ended June 30 jumped to $6.34 billion, according to the median estimate of five analysts surveyed by Bloomberg News.


Codelco

Chile's state-owned Codelco, the world's biggest producer of the metal, will begin labor talks later this year. Analysts including John Meyer at Numis Securities in London said the Escondida strike may trigger protests.

``Mine workers are closely watching the potential for settlement at Escondida and may seek to achieve similar improvements in salary and bonus,'' Meyer said. ``BHP may be reluctant to yield to union demands on base salaries because of the knock-on effect within the industry.''

Copper inventories monitored by the LME have climbed 26 percent this month, helping to weigh down prices.

``We've seen quite a healthy build during August,'' said Nick Moore, a London-based analyst at ABN Amro Holding NV.


Demand Slowdown

Global economic growth may slow, curbing metals demand, said Stephen Briggs, an analyst at Societe Generale, one of the 11 companies trading on the floor of the LME. The metal is used in wires and pipes.

There is a ``sense growth is set to slow significantly'' in the next 12 months, he said.

German investor confidence plunged to a five-year low in August on concern rising interest rates and taxes will hamper growth in Europe's largest economy.

The ZEW Center for European Economic Research index of institutional and analyst expectations dropped to minus 5.6, the lowest since June 2001, from 15.1 in July, the institute said in Mannheim today.

The Times August 23, 2006

Business in Brief - Escondida miners reduce demands


The striking union at Chiles Escondida, the worlds biggest copper mine, has agreed to reduce its wage and bonus demands on the sixteenth day of a strike that has rattled copper markets. The union trimmed its demand for a rise to 8 per cent from 10 per cent and its demand for a special copper-price-linked bonus to $19,000 (10,000) per worker, from $30,000. The mine is owned by BHP Billiton and Rio Tinto, the worlds biggest mining groups.

Copper Charts Look Shaky - Australia's CBA

Wednesday, August 23, 2006 10:28:28 PM ET
Dow Jones Newswires



LME copper chart patterns starting to look weak, says Australia's CBA bank: "Virtually any sort of dip here will confirm a slow downtrend is in place." LME 3-month $7,560/ton, down $60 on London PM, extending modest overnight losses on slight easing of tensions over Escondida mine strike. Loss of $7,500 level may spur downward spiral. However, even if Escondida strike reaches reasonably swift conclusion, "there's potential for strikes at other mines, so the issue is not yet dead." (JAD)

Copper Falls as U.S. Housing Data Signals Metal Demand May Slow

By Claudia Carpenter and Millie Munshi

Aug. 23 (Bloomberg) -- Copper prices fell in New York on signs that U.S. demand for the metal used in construction, plumbing and wires may slow.

Copper has dropped 14 percent from a record $4.04 a pound on May 11, even amid supply disruptions in Chile. Sales of previously owned U.S. homes fell in July to the lowest in more than two years, and the supply of unsold homes climbed to a record. Builders are the biggest users of copper in the U.S.

``There's not a great demand for copper now,'' said John Hanemann, president of Hanemann Trading Co. in New York.

Copper futures for December delivery fell 1.05 cents, or 0.3 percent, to $3.4675 a pound on the Comex division of the New York Mercantile Exchange. Prices dropped as much as 1.7 percent and gained as much as 1.4 percent during the session. Prices have more than doubled in the past year.

Copper for delivery in three months was unchanged at to $7,620 a metric ton on the London Metal Exchange. Inventories tracked by the LME fell 125 tons to 122,650 tons today, the second straight decline.

Copper pared losses in New York after striking Chilean miners at Escondida, the world's largest source of the metal, said they are ready to stay off the job for as long as 60 days. Prices dropped yesterday on speculation the strike may end soon.

BHP Billiton Ltd., which runs Escondida, said yesterday it would start to look for replacement workers. The strike started Aug. 7.

New Home Sales

The focus may shift to new U.S. home sales. A report from the Commerce Department tomorrow will probably show new-home sales declined to an annual rate of 1.1 million in July from 1.131 million in June, according to the median estimate of economists in a Bloomberg survey.

Builders account for about 40 percent of U.S. copper demand. An average single-family home contains about 400 pounds of the metal, according to the Copper Development Association.

Nickel for delivery in three months fell $950, or 3.2 percent, to $29,000 a ton in London, snapping a three-session surge. The metal yesterday reached to the highest in at least 19 years and the LME had imposed trading restrictions because of a shortage of the metal used in stainless steel.

``Consumers are holding back from doing longer-term business,'' said Herwig Schmidt, a trader at Triland Metals Ltd. in London ``It's difficult to justify these prices.''

Copper Declines After U.S. Housing Data Point to Slower Demand

By Feiwen Rong

Aug. 24 (Bloomberg) -- Copper in Shanghai fell on concern a drop in U.S. home sales will further slow demand for the metal used in plumbing, construction and wire in the world's largest economy.

Sales of previously owned U.S. homes dropped in July to the lowest in more than two years, and the supply of unsold homes climbed to a record, the National Association of Realtors said yesterday. Builders are the biggest user of copper in the U.S, the largest market for the metal after China.

There's ``pretty soft data from the U.S. housing numbers,'' Mark Pervan, head of research at Daiwa Securities SMBC, said from Melbourne. The housing report offset the impact of the strike at the world's largest copper mine in Chile, he said.

Copper for October delivery on the Shanghai Futures Exchange fell as much as 440 yuan, or 0.7 percent, to 67,570 yuan ($8,475) a ton. The contract traded closed the morning session at 67,770 yuan in Shanghai.

Workers at the Escondida mine, who have been on strike since Aug. 7, are ready to hold out for 30 to 60 days after lowering their wage and bonus demands, Luis Troncoso Munoz, president of the Escondida mine workers union, said yesterday.

The mine, run by Melbourne-based BHP Billiton, the world's largest mining company, accounted for 8.5 percent of all mined copper worldwide last year.

Copper for delivery in three months dropped as much as $20, or 0.3 percent, to $7,590 a metric ton on the London Metal Exchange, and traded at $7,600 at 12:35 p.m. Singapore time.

Copper Falls as Data on U.S. Economy Signals Demand May Slow

By Millie Munshi and Katy Watson

Aug. 24 (Bloomberg) -- Copper prices in New York fell the most in a week on signs demand may slow after new-home sales in the U.S. declined more than economists forecast in July and a measure of orders for durable goods dropped.

Copper has dropped 15 percent from $4.04 a pound, the highest ever, on May 11. The number of unsold houses climbed to a record, deepening a slump in an industry that fueled economic expansion for five years, Commerce Department data showed. Declines in demand for commercial aircraft and motor vehicles resulted in a 2.4 percent drop in total durable-goods orders in July.

``You've got this macro situation which is deteriorating and demand that is slowing,'' said David Threlkeld, president of Resolved Inc., a copper trading company in Scottsdale, Arizona. ``I think copper is going to collapse.''

Copper futures for December delivery fell 4.85 cents, or 1.4 percent, to $3.419 a pound on the Comex division of the New York Mercantile Exchange, the biggest percentage decline since Aug. 16. Prices still have doubled in the past year. Builders are the biggest users of copper in the U.S.

Copper for delivery in three months on the London Metal Exchange declined $180, or 2.4 percent, to $7,430 a metric ton on the London Metal Exchange.

Demand lagged behind supply in the first half, creating a surplus of 81,000 tons, the World Bureau of Metal Statistics said today. Consumption in China, the world's largest consumer of copper, fell 8.4 percent.

Escondida

Copper earlier climbed as much as 1.2 percent in London after Chilean workers at BHP Billiton Ltd.'s Escondida mine, the world's biggest source of the metal, said they are prepared to extend a strike, further squeezing supplies. Union members walked off the job on Aug. 7.

``I think the market has written these events into the price,'' said William Adams, an analyst at Basemetals.com in Saffron Walden, England. ``People are thinking this strike is not going to go on for too much longer.''

Nickel prices gained $150, or 0.5 percent, to $28,900 a ton in London after earlier climbing as much as 3.5 percent. Prices have more than doubled this year.

Inventories monitored by the LME dropped 240 tons, or 3.6 percent, to 6,426 tons today.

Prices on Aug. 22 reached $29,950, the highest in at least 19 years. Stockpiles of the metal used to make stainless steel have tumbled 82 percent this year, and the prospect of shortages prompted the LME to impose trading restrictions.

``The nickel market is likely to remain tight for some time, and critically low stocks could prompt further price strength and clearly more volatility,'' Robin Bhar, an analyst in London at UBS AG, said in a report.

Prices for immediate delivery exceeded benchmark three-month prices by as much as $5,250 a ton as of Aug. 22, tripling from Aug. 1 and signaling a supply squeeze.

Output has declined this year. A strike at Inco Ltd.'s Voisey's Bay mine in Newfoundland has curbed production since July 28. BHP said production at its Yabulu mine in Australia dropped by a third in the second quarter.

The shortfall in nickel will be 30,000 tons this year, according to Toronto-based Inco, the world's second-largest producer. Stainless-steel output will rise 8.6 percent to 26.4 million tons, according to the International Stainless Steel Forum.

Times Online August 25, 2006

Yunnan Copper, Chinas third-largest producer of the metal, aims to increase its mining output at home and overseas to 300,000 tonnes of copper in 2010, from about 130,000 tonnes at present.

Copper Declines After BHP Resumes Cathode Output in Chile

By Feiwen Rong

Aug. 25 (Bloomberg) -- Copper fell in Shanghai after BHP Billiton, the world's biggest mining company, resumed production of copper cathodes at the company's Escondida mine in Chile, where 2,052 workers went on strike Aug. 7.

Production at Escondida, the world's largest copper mine, remains at 50 percent of normal and the cathode plant, which converts the ore to a metal for shipment, is running at about 10 percent, company spokeswoman Alejandra Wood said yesterday in a phone interview from Santiago.

``The focus remains on Escondida, if BHP can bring back some of the production, that's bearish for the copper prices,'' Wang Zheng, metal analyst at Dalu Futures Co. in a phone interview from Shanghai.

Copper for October delivery on the Shanghai Futures Exchange fell as much as 650 yuan, or 1 percent, to 67,150 yuan ($8,421) a ton. The contract traded at 67,570 yuan a ton at 2:24 p.m. Shanghai time.

Negotiations between Melbourne-based BHP and its striking workers remain frozen, erasing about $16 million a day of profit for owners that include London-based Rio Tinto Group and Tokyo- based Mitsubishi Corp. Escondida produced 8.5 percent of the world's mined copper last year.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, fell as much as 1 percent to 68,190 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Marianne Barriaux
Friday August 25, 2006
The Guardian

Miners were the heaviest fallers among leading shares. BHP Billiton fell 25p to 989p as concerns continued over the strike at its Escondida copper mine in Chile. The shares were also hit by news that Marks & Spencer had replaced BHP on the focus list of investment bank ING.

Other miners were down as concerns over a US slowdown placed the future of the commodities "super cycle" in doubt. Lonmin was down 82p to 27.40, and Rio Tinto fell 89p to 26.40.

William Adams, of the news and research site BaseMetals.com, said: "With the US running a trade deficit, a slowdown in the US means the US will import less, especially from Asia and China. In turn, if these countries are not able to export as much, then they will not have to import so much raw material, and before you know it, demand for commodities suffers."

Dow Jones Newswires - Merrill Keeps Sell On Jiangxi Copper


STOCK CALL: Merrill Lynch keeps Sell on Jiangxi Copper on lower copper price outlook, pressures on margins for smelters' short mine concentrate.

JXC posted strong 1H net profit of CNY0.72/share this week, +97% on-year; but 10% below Merrill's forecast due to 14% lower gold output, higher tax rate.

Merrill stays concerned about sustainability of current copper prices of US$3.44/lb, particularly once strike at world's largest copper mine Escondida is resolved.

Dow Jones Newswires - 25 Aug 2006

Imperial Set To Drill Giant Copper Property


VANCOUVER, BRITISH COLUMBIA - Imperial Metals Corporation announces that drilling will begin shortly on a 1,500 metre diamond drillhole at its wholly owned Giant Copper property.


The AM Zone, a breccia pipe with a horizontal dimension of 300 metres by 200 metres, is the most explored zone on the Giant Copper property. The breccia pipe has been explored since the 1930's by drifting, raising and diamond drilling over a vertical interval of 460 metres, and remains open for expansion to depth. The planned 1,500 metre drillhole will test the depth extent of this zone, with emphasis on the extension of the higher grade mineralization which is focused on the northern nose of the breccia pipe.

Drilling in 1995 and 1996 by Imperial continued to expand the known mineralization in both the AM Zone and Invermay Zone. AM Zone hole GSC95-5 located in the southern part of the breccia intercepted 0.64 metres grading 8.12 g/t gold and 7.0 g/t silver, and 26 metres grading 0.417% copper, 0.313 g/t gold, 16.0 g/t silver and 0.012% molybdenum.
Invermay Zone hole GCS96-4 intercepted 3.0 metres grading 0.658% copper, 9.859 g/t gold and 26.7 g/t silver, not included in a longer interval of 92.4 metres grading 0.198% copper, 0.23 g/t gold and 7.8 g/t silver. Both of these holes are located outside the north nose of the AM breccia, which was the focus of historic exploration.


The 2,880 hectare property, located 220 kilometres east of Vancouver near Hope, hosts a copper-gold-silver-molybdenum system with an associated breccia pipe and base metal veins. All of the showings appear to be related to a central hydrothermal system driven by a multiphase porphyritic intrusive. Numerous widespread showings attest to the strength of the system, and all of the showings appear to be related to the central hydrothermal system.

Recent world wide exploration for high grade deposits at the root of porphyry systems and the buoyant commodity market encourages deep exploration at Giant Copper.

Steve Robertson, P.Geo. is the Qualified Person as defined by National Instrument 43-101 for the exploration program. The Company has filed a 43-101 Technical Report for the Giant Copper property which can be viewed on the Sedar website www.sedar.com or on Imperial's website www.imperialmetals.com.

Imperial is a mine development and operating company based in Vancouver, British Columbia. The Company's key properties are the Mount Polley open pit copper/gold producing mine (100% interest) in central British Columbia, the Huckleberry open pit copper/molybdenum producing mine (50% interest) in northern British Columbia, and the development stage Sterling gold mine (100% interest) in southwest Nevada.

Dow Jones Newswires - Monday, August 28, 2006

Copper Fundamentals In Hands Of Disruptions


Copper market in 2007 to be in similar position as in past 2 years - looks as though market could move into oversupply particularly if demand weak, but surplus remains dependent on delivery of projects on schedule, and less supply disruption than has been case this year, says Macquarie Research. Base case is for 190,000-ton surplus in refined copper in 2007, then if demand bounces back in 2008, refined copper market could move into deficit in first half of 2008; "this could mean some weakness next year, but a rebound in prices again in 1H08."

Mining Weekly - 28 August 2006

BHP to increase production at Escondida copper mine


BHP Billiton will seek to increase production in Chile at its Escondida copper mine, the biggest in the world, as more than 2 000 workers extend a strike that's cut output in half into a fourth week.

The mine may try to hire more replacement workers this week, adding to the 50 already employed, Alejandra Wood, a spokeswoman for the Melbourne-based company said late yesterday from Santiago. Neither BHP nor the labor union have plans to restart talks, which have been frozen since the union rejected the company's August 21 offer.

The goal is to produce as much as possible, given the situation, Wood said. Production is now at 50% of pre-strike levels. Output at the cathode plant, where copper ore is refined into a metallic form, is at 15%, Wood said.

Workers at the mine, which accounted for about 8,5% of the world's mined copper last year, began striking August 7 in pursuit of increased pay and benefits. They are seeking a bigger share of the company's profits after copper prices surged to a record this year.

BHP, which owns 57,5% of the mine, reported a 63% jump in full-year profit to a record $10,45-billion last week. Escondida's owners, which include London-based Rio Tinto Group and Tokyo-based Mitsubishi Corp., have said the strike is erasing about $16-million a day in profit.

Copper prices in Shanghai rose for the first day in four on concern rival copper mines may also face strikes. Labor talks are scheduled later this year at Chile's state-owned Codelco, the world's biggest producer.

Copper for October delivery on the Shanghai Futures Exchange gained as much as 570 yuan, or 0,8%, to 68 050 yuan ($8 537) a metric ton. The contract traded at 67 910 yuan a ton at 1:59 p.m. in Shanghai.

Copper supply in the medium term remains tight, Yu Mengguo, metal analyst at Jinpeng Futures Co., said by phone from Beijing. Stories of labor unrest in such a market make people more nervous about supply.

The Escondida union's lawyers are reviewing company plans to use subcontractors in new areas of the mine to increase production and may file a claim against the practice, union spokesman Pedro Marin said in a phone interview from Antofagasta, 1 200 km north of Santiago.

BHP's Wood said Chile's labor inspector in Antofagasta has approved of how the company is using subcontractors at the mine.

(AP Online via COMTEX) - SANTIAGO, Chile, Aug 28, 2006

Striking Miners Seek Share of Profits


The world's largest mining company has had a very good year, something not lost on its miners in Chile. Some 2,000 miners at BHP Billiton's Escondida mine in Chile have been striking since early August, demanding a larger slice of what one worker called "the cake" being enjoyed by the Anglo-Australian company in the form of record profits from soaring world metal prices.

The strike has roiled world copper markets, often setting off buying and selling waves. Copper from Escondida represents about 8 percent of world production, and the strike has brought about half that production to a halt - stoking fears of a shortage in an already tight market.

The strike is being closely followed across Chile, the world's largest copper producer, where the government is under pressure to spend more of its copper windfall and unions are waiting to see what kind of concessions the Escondida strikers gain.

But executives of BHP Billiton Ltd and other mining companies are wary of being locked into contracts that will mean significantly higher labor costs just as metal prices may be peaking.

There's no doubt, however, these are bonanza days for BHP Billiton. The Melbourne-based company reported it earned $10.45 billion for the year through June, an Australian corporate profit record.

When the Escondida miners' union last negotiated a contract with BHP Billiton three years ago, copper sold for about 80 cents a pound. Mines were mothballed. The industry was near the bottom of a bust cycle.

Since then, demand from fast-growing economies such as China and India have helped drive the price of copper to about $3.50 today. Strong demand, supply constraints and a broader rally in the commodities market pushed the price of copper to an all-time high of $4.08 a pound in May.

This time around, the workers want their share of the boom times. About 800 workers have been camped in tents in a sports center the company owns in the port city of Antofagasta since Aug. 7, having refused the company's contract offers.

The copper mine cuts a deep bowl into Chile's Atacama Desert, bordered by the Andes on the east and the Pacific Ocean on the west, outside of Antofagasta, 870 miles north of Santiago.

Oscar Moreno, 44, has worked 17 years at Escondida, where he drives the heavy-duty trucks and tractors used in mining operations. He lives with his wife and two of their children, in a house partly paid for with a loan from the company, in Antofagasta, about 125 miles away.

Moreno said he and the other workers generally work four 12-hour days, sleeping and eating at the mine, then have four days at home. He earns about $1,490 a month, plus quarterly bonuses.

"I feel my situation is good, compared to the general situation of workers in Chile," he said in a telephone interview from the strike camp. "I cannot complain, really, and I do not complain about my situation. My complaint is about the money that the company makes. We are asking for just one percent of the 'cake' it gets."

In reporting its annual profit - up 63 percent from the prior year - BHP Billiton noted the Escondida mine produced record volumes for the company.

But costs are on the rise, too. Labor is the company's third-largest cost, behind energy and mining expenses, according to the company's latest annual report.

BHP has offered workers a four-year contract that includes a 4 percent wage raise plus bonuses, up from an initial 3 percent offer. The workers want 8 percent plus bonuses, after initially asking for 13 percent.

"Our work force at Escondida is some of the highest-paid in Chile, and this is essentially the most attractive package that has been offered to the work force in that region," said Chief Executive Chip Goodyear, in a conference call.

Although the mine's name means "hidden" in Spanish, Escondida is now the center of attention for copper traders in New York and London. The slightest news or speculation will set off a flurry of buying or selling in the New York Mercantile Exchange, where millions of dollars in copper contracts change hands daily.

"Everyone is focused on Escondida," copper trader John Hanemann said.

The result of the Escondida walkout will have repercussions throughout the industry, traders and analysts say.

Contract talks at a number of copper mines - mainly in Chile - are due to expire in coming months, including Chile's state-owned Chuquicamate, the world's largest open pit copper mine. If workers at all six of the mines with expiring labor contracts opt to strike, 18 percent of world copper supply could be at risk, Merrill Lynch commodities strategist Francisco Blanch said in a recent report.

Chile represented about 36 percent of world copper production in 2005, well ahead of second-placed producer the United States, with about 8 percent of world output, according to the U.S. Geological Survey.

The country's leftist government has not intervened in the strike, although the impact on the economy is strong. Escondida paid $1 billion in taxes during the first half of this year alone, BHP Billiton's chief executive in Chile, Diego Hernandez, told the daily El Mercurio.

Other Chilean labor groups are also calling for some of the copper windfall, including powerful government-employee organizations representing school teachers and health workers.

And voices are emerging from inside President Michelle Bachelet's center-left coalition to increase government spending, especially in social sectors. The Christian Democratic Party, the largest in the four-party coalition, asked Bachelet for a double-digit increase in the 2007 budget now being drafted. Bachelet said the budget increase will be below 10 percent.

The Escondida miners, meanwhile, say they only want BHP Billiton to share a little of the bounty.

Carlos Munoz, a 45-year-old metallurgic plant operator, said the $1,080 he earns each month covers his family's basic expenses but not the needs of his 10-year-old daughter, Camila, who suffers from a chronic medical condition and needs an ear operation.

"Not even the bonuses are enough for me to give her everything she needs," he said. Bottom line, he said, "we live very tight."

Copper Falls as Rising Inventories May Signal Demand Is Slowing

By Millie Munshi

Aug. 28 (Bloomberg) -- Copper futures in New York fell as rising stockpiles fueled speculation that demand may be slowing.

Inventories monitored on the Comex division of the New York Mercantile Exchange jumped 52 percent last week, and a U.S. government report showed a decline in new-home sales. Builders are the biggest users of copper in the U.S.

``There were some extra stocks coming into the Comex warehouse,'' said John Hanemann, president of Hanemann Trading Co. in New York. ``There just doesn't seem to be a lot of demand.''

Copper futures for December delivery fell 0.65 cent, or 0.2 percent, to $3.425 a pound at 9:21 a.m. on the Comex division of the New York Mercantile Exchange. Copper, after more than doubling in the past year, has declined 15 percent since reaching a record $4.04 on May 11.

The London Metal Exchange is closed today for a national holiday.

Copper in China Little Changed as Traders Await Funds' Return

By Chia-Peck Wong


Aug. 29 (Bloomberg) -- Copper prices in Shanghai were little changed as traders sought new trading leads while waiting for the return of hedge and investment funds to the market.

Prices of copper have surged 63 percent this year partly due to buying from such funds, which are seeking better returns than those offered by the equity and bond markets. Traders such as Wang Zheng said these funds have been less active in trading commodities this quarter.

``The direction for copper isn't clear and trading activity in Shanghai has fallen,'' Wang, a trader and analyst at Shanghai Dalu Futures Co., said by phone today. ``We're hoping that the funds will return soon or some fresh news will stimulate trading.''

Copper for October delivery fell as much as 340 yuan, or 0.5 percent, to 67,540 yuan ($8,478) a metric ton on the Shanghai Futures Exchange. The contract, which earlier rose as much as 170 yuan, or 0.3 percent, traded at 67,850 yuan by the midday break at 11:30 a.m. local time.

News that union members at BHP Billiton's Escondida mine in Chile will begin demonstrations this week unless the company agrees to restart talks on wages isn't having an impact on prices, said Wang.

``Everyone's tired of the Escondida news,'' he said.

The strike at Escondida, the world's biggest copper mine, has entered its fourth week. More than 2,000 workers went on strike Aug. 7, and negotiations have been frozen since the union rejected BHP's latest offer on Aug. 21.

BHP, Rio Tinto

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 2.4 percent to 68,600 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Metal for December delivery fell 0.05 cent to $3.450 a pound on the Comex division of the New York Mercantile Exchange at 11:45 a.m. Shanghai time.

Copper for three-month delivery gained $26, or 0.3 percent, to $7,586 a metric ton on the London Metal Exchange as of 11:41 a.m. Shanghai time. The metal, used in wiring and plumbing, has more than doubled in the past year. It rose to a record $8,800 on May 11.

BHP Billiton, the world's biggest mining company, owns 57.5 percent of Escondida. Rio Tinto owns 30 percent, while a group led by Mitsubishi Corp. owns 10 percent. The International Finance Corp. owns the rest. Mine management said Aug. 16 the dispute was costing the $16 million in lost profit a day.

Aluminum prices in Shanghai rose because more traders preferred to trade the lightweight metal after inventories declined, Li Rong, a metal analyst at Great Wall Futures Corp., said by phone from Shanghai.

``Aluminum's demand and supply factors seem to be better, especially after stockpiles fell so drastically last week,'' he said.

Aluminum stockpiles in Shanghai Futures Exchange warehouses plunged to their lowest level in 15 months as manufacturers used more of the metal instead of pricier copper, and exports increased.

Copper in Shanghai Falls on Concern Demand May Slow in U.S.

By Chia-Peck Wong

Aug. 30 (Bloomberg) -- Copper in Shanghai fell after U.S. consumer confidence dropped in August, increasing concern demand may be curbed in the world's second-biggest user of the metal.

The Conference Board's index of confidence fell to its lowest in nine months, as higher fuel prices raised inflation concern and the housing market slowed. Builders are the biggest users of copper, which has more than doubled in price during the past year as demand surged for wire and pipe.

``The consumer confidence data is a weak sign for copper,'' Li Ling, a trader at Star Futures Co., said from Shanghai.

Copper for October delivery fell as much as 860 yuan, or 1.3 percent, to 66,950 yuan ($8,413) a metric ton on the Shanghai Futures Exchange. It traded at 67,240 yuan by midday break.

The board's index dropped to 99.6 from 107.0 in July, the New York-based business group said yesterday. Sales of pre-owned U.S. homes fell in July to the lowest in more than two years, the National Association of Realtors said last week.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, fell as much as 1.2 percent to 67,800 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

Dow Jones - 30 August 2006

LME review: Copper liquidated; long holders grow impatient


Long position holders liquidated London Metal Exchange three-month copper after growing tired of waiting for prices to move outside tight ranges in slow summer trading, traders said.

Copper maintained a tight range between $7,450-$7,580 a metric ton for the morning session before light liquidation in the afternoon pushed prices back 2.7% to an 11-day low of $7,350/ton. Prices closed late kerb in London down $165 on previous PM kerb levels at $7,395/ton.

The bearish tone in copper was reinforced by market talk that labour negotiations at Chile's Escondida copper mine may be nearing a resolution after 23 days, another trader said.

"Rumours are going round the floor that (Escondida) talks are going very well and that's had an impact on prices," said one trader.

Nickel prices retreated to $28,450/ton at late kerb, down $950/ton on previous kerb prices. Earlier in the session, prices found good support following another stock drawdown. Nickel stocks fell by 312 tons to 5,808 tons while LME cancelled warrants rose to 74.28% from 72.65%, leaving just 1,494 tons available to the market.

LME aluminum prices retreated from a high of $2,515/ton to $2,470/ton at late kerb in London and remained bound by resistance at $2,440/ton-$2,500/ton. Prices closed just $3 shy of earlier intra-day lows of $2,470/ton at late PM kerb.

Zinc prices fell $65 from previous kerb levels to $3,295/ton after failing to mount resistance at $3,400/ton.

Bloomberg - 30 August 2006

Copper prices fall on signs of slowing economy, metals demand


Copper fell the most in almost two weeks after a private survey showed U.S. consumer confidence is the lowest in nine months, fueling concern that a slowing economy will curb demand for metals.

The Conference Board's index of confidence dropped to 99.6 this month from 107.0 in July, as higher fuel prices raised inflation fears and the housing market slowed. Builders are the biggest users of copper, which has more than doubled in price during the past year as demand surged for wire and pipe.

"We've been seeing softening economic data and today's consumer confidence report played into that general sentiment," said Chip Hanlon, president of Delta Global Advisors Inc. in Huntington Beach, California. Prices may drop 10 percent by the end of September if economic conditions continue to slow, Hanlon said.

Copper futures for December delivery fell 6.65 cents, 1.9 percent, to $3.384 a pound on the Comex division of the New York Mercantile Exchange, the lowest closing price and the biggest one-day drop for the most-active futures contract since Aug. 17. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

Copper for delivery in three months dropped $160, or 2.1 percent, to $7,400 a metric ton at 6:44 p.m. on the London Metal Exchange. Nickel fell $900, or 3.1 percent, to $28,500 a ton after earlier rising to $29,900.


Home sales fall

Sales of previously owned U.S. homes fell in July to the lowest in more than two years, the National Association of Realtors said last week. Sales of new homes fell to the second- lowest this year, according to the Commerce Department. Home sales are falling after five years of record gains, slowing price increases and making it harder for owners to extract equity, a source of funding for consumer spending in recent years.

"The housing slump will put a damper on" U.S. copper demand," said Darren Stoody, futures trading manager at Omnisource Inc., a scrap metal recycler in Fort Wayne, Indiana.

Copper also was pushed lower by speculation that a strike at BHP Billiton Ltd.'s Escondida mine in Chile will soon be resolved.

Workers at the world's biggest copper mine, who are seeking a bigger share of BHP's profit after copper prices doubled to a record in the past year, said they expect to resume talks on a settlement. Production at Escondida has been cut by about half, and no negotiations are scheduled, Melbourne-based BHP said.


'Digging' in

"The market's still holding out for a reasonably quick settlement," said David Thurtell, a metals analyst at BNP Paribas in London. "It looks as though BHP is digging its heels in, and although they've only had fairly limited success so far in getting outside workers in, the bottom line is the miners don't really like being on strike."

The metal, which reached a record $8,800 on May 11, has lost 6.6 percent since the strike began Aug. 7, on signs of slowing economic growth and rising inventories.

Also on the LME, nickel plunged $900, or 3.1 percent, to $28,500, zinc dropped $65 to $3,295 a ton, while aluminium was $15 lower at $2,470 a ton. Lead gained $5 to $1,225 a ton and tin was $155 higher at $8,700 a ton.

COMEX copper ends off lows in technical trade - COMEX copper down 2 pct at open on local selling


NEW YORK, Aug 29 (Reuters) - Copper futures in New York settled down but off their session lows Tuesday after an early push to a key support level held and forced some investors to cover their short positions, sources said.

"We came down and tested trend-line support at around the $3.34-$3.35 level, and bounced from there," said one broker at a futures commission merchant.

Active December copper lost 6.65 cents, or 1.9 percent, at the close to settle at $3.3840 a lb on the New York Mercantile Exchange's COMEX division. Trading ranged from $3.46 to an eight-day low at $3.3450, after sell-stop orders were triggered through the $3.3850 a lb level, floor dealers said.

Copper for September delivery closed at $3.3905 a lb, down 6.40 cents on the day, while spot August, which expired after the close, sank 6.10 cents to $3.4230.


COMEX final copper volume was estimated at 18,000 lots, more than double that of Monday's official count of 6,444 lots.

Nearly 3,866 lots of spreads were traded on the day, with market players continuing to roll positions out of September copper and into further delivery months ahead of September copper's first notice day on Thursday.

The market also took a hit following weaker-than-expected U.S. consumer confidence data for August, which fell to their lowest levels since November 2005.

With a lack of any new developments in the ongoing labor negotiations at Chile's Escondida, the world's largest copper mine, dealers said the market's focus would now turn to the spate of U.S. economic data set for release this week.

On Wednesday, attention will turn to second quarter U.S. Gross Domestic Product, expected at 3.0 percent. In the first quarter, the U.S. economy grew 5.6 percent.

Fundamentally, a strike at the Escondida copper mine, now in its fourth week, continued to be a supportive factor as the uncharacteristically long strike weighed on an already tight market.

Talks between the two sides broke off more than a week ago after the 2,052-member union at Escondida rejected an offer for a 4 percent raise in a four-year contract and a special bonus of $18,000.

The strike has seen production of concentrates from the mine cut by 50 percent and cathode production is at 15 percent of normal output.

Chile, the world's biggest copper miner, produced 458,214 tonnes of the red metal in July, up 9.1 percent from the same month last year, the government said Tuesday.


London Metal Exchange inventories fell 700 tonnes to 124,125 tonnes on Tuesday, while COMEX copper inventories rose 1,027 short tons to 12,413 tons in Monday's data.

LME three-months copper closed at $7,390 a tonne, down $160 from Friday's kerb close.

Peru's mine protests flare after eerie calm - By Robin Emmott


LIMA, Peru (Reuters) - After a year of eerie quiet in Peru's anti-mining protests, peasants who forced Latin America's top gold pit to close have rudely reminded President Alan Garcia of one of the most complex problems facing his new government.

Social workers, local priests and analysts say the sort of demonstrations that shut U.S-owned Yanacocha on Monday are unlikely to end until money trickles down to poor Andeans to convince them the industry is not a threat to their livelihoods.

"The problem is that there are people who don't just want to freeze our operations at Yanacocha but to freeze mining in Peru completely," said Carlos Santa Cruz, a senior director at Yanacocha's owner, Denver-based Newmont Mining.

Finding money for poor mining regions is not a problem in the world's No. 3 copper producer as Peru enjoys a three-year bonanza in international metals prices. Garcia won a pledge by miners last week to make a one-off $774 million payment to improve the lives of the half of Peruvians who live on $1 a day or less.

That is on top of a record $800 million that mining regions will receive this year from royalties and mine income tax.

But much of that money is being spent by local mayors who are keen to glorify their term in office and win reelection in municipal elections in November. Monuments ranging from a tribute to the iguana to unheated outdoor swimming pools in the freezing Andes are just some of the public works in towns without running water, roads and electricity, fueling frustrations among locals.

In the northern Andean province of Cajamarca, home to Yanacocha, the local government aims to build a bullring at a cost five times that of the region's annual health budget.

"It's clear the spending isn't satisfactory," said Energy and Mines Minister Juan Valdivia. "There has been permanent conflict."

International mining companies have called on the government to implement a spending reform and Garcia has promised to respond, pledging that his government will work with town halls to draw up better projects that can also create jobs.

But in the short term, the government, communities and miners are only blaming each other for the Yanacocha shutdown ahead of the first talks on Tuesday to end the closure.


BLAME GAME

"It seems to me that (Yanacocha) has handled things badly," Valdivia said, without giving more details. Miners blame the state for being absent in remote areas where miners operate.

"Miners cannot provide schooling, hospitals and jobs to everyone, although increasingly they do that," said Carlos del Solar, head of Peru's National Society of Mining.

The shutdown by protests at Yanacocha is the second since 2004, when farmers forced Newmont to abandon plans to develop its rich Cerro Quilish gold pit within the mine's huge complex.

Officials at Yanacocha say the mine is often targeted because it is so emblematic of Peru's mining boom over the past decade and because Cajamarca is one of the country's poorest provinces.

Farmers and locals say they are forced to protest or risk being forgotten in a country where Andean peasants live in societies unchanged since the Spanish conquest of the 1500s.

"What can we do? Yanacocha has not kept its promises," said Luciano Llanos, mayor of Combayo community near Yanacocha, although he said he did not want the mine to close permanently.

Chile Copper Miners to Vote Today to End Strike at BHP Mine

By Jeb Blount


Aug. 31 (Bloomberg) -- Workers at BHP Billiton Ltd.'s Escondida copper mine are set to vote today in Chile on a new labor contract, ending a 25-day strike that's disrupted supply.

BHP, the world's biggest mining company, agreed to increase wages by 5 percentage points above inflation and pay a 9 million Chilean peso ($16,705) bonus, company spokesman Mauro Valdes said yesterday from Santiago. Workers may return as early as tomorrow, he said. The offer was ``acceptable,'' union President Luis Troncoso said yesterday after presenting it to his members.

The price of copper, used in wires and pipes, has more than doubled in London in the past year on demand from China, prompting unions to seek a larger share of company profits. An accord with BHP may set a precedent for talks expected this year at other mines in Chile, the largest supplier of the metal.

``Escondida will fix a benchmark for all of the mining industry,'' said Leonardo Suarez, an economist at brokerage Larrain Vial SA in Santiago.``It will be difficult to negotiate for less than what they got.''

Copper for three-month delivery fell as much as $50, or 0.7 percent, to $7,400 a metric ton on the London Metal Exchange. The contract traded at $7,433 at 10:27 a.m. Shanghai time.

The offer was ``good'' and ``balanced,'' union spokesman Pedro Marin said yesterday. ``Effectively we'll have a deal,'' BHP's Valdes said in a phone interview. ``We're satisfied.'' The union and BHP held talks yesterday in Antofagasta.

Workers seeking better pay and benefits began the strike Aug. 7, reducing the mine's output by half. Mine executives said Aug. 16 the dispute was costing owners including Melbourne-based BHP, London-based Rio Tinto Group and Tokyo-based Mitsubishi Corp. $16 million in profit a day. Escondida accounted for 8.5 percent of all mined copper worldwide last year.

`Our Fight'

Government-owned Codelco, the world's largest copper company, will be negotiating wage agreements with workers this year at its Andina and Chuquicamata mines in Chile. BHP must reach an agreement with union miners at its Spence mine in Chile by Sept. 12 or face a possible strike. The nation produces 36 percent of the world's copper.

``This is not just our fight,'' said union president Troncoso. ``This is part of the fight by all miners in Chile to share in the high profits and high prices that the mining companies are earning.''

Bolstered by New York copper's surge to $4.04 a pound in May, BHP on Aug. 23 posted second-half profit of $6.1 billion, a record for an Australian company. Profit at Escondida more than tripled in the first six months of the year to $2.92 billion from $936.9 million a year earlier.

Replacement Workers

The Escondida's Workers Union No. 1, which represents 94 percent of the mine's employees, had been seeking a wage increase of 13 percentage points above inflation and a bonus of 16 million pesos a worker for a 36-month contract. Chile's inflation rate was 3.8 percent in July.

Chilean laws allowing the company to replace striking workers weakened the impact of the walkout, the union's Marin said. BHP said Aug. 25 it hired 50 replacement workers while 2,053 walked out.

Resentment of union members' salaries and benefits run strong in Antofagasta, a dusty Pacific-coast port town of 300,000, 170 kilometers northwest of the mine, Pablo Diaz, a non-union mine worker, said in an interview on Aug. 25.

``While people like us don't have enough money to buy a microwave oven, these strikers are driving around in brand-new four-wheel-drive trucks,'' Diaz, 28, a contract worker at the mine, said as he relaxed on a bench in the Plaza Colon, the main square of Antofogasta, where most Escondida workers live. ``They're too greedy.''


Placer Dome

Previous labor disputes at Chilean copper mines have been short lived. Contract employees at state-owned Codelco, the world's biggest copper producer, returned to work after a 17-da strike at El Teniente and Andina mines in January. Placer Dome Inc.'s 500 workers at the Zaldivar copper mine ended an eight- day strike in July 2005 after the company sweetened a wage offer.

The striking miners earn about 1 million pesos ($1,866) a month, three times what Diaz makes as a non-union employee, and he doesn't get the bonuses, health-care insurance, housing subsidies, and interest-free loans union members enjoy as part of their contract with BHP, the world's largest mining company.

Jose Luis Arce, 34, who works for a subcontractor at BHP's Spence Copper mine, also in Northern Chile, said he has worked 20 days of 12-hour shifts in a row with only 10 days off, earns 500,000 pesos a month and gets no benefits. Diaz works seven days and has seven days off. Union miners work on a four-day cycle. The mine hasn't started production.

``We don't even get healthcare,'' Arce said in an interview in Antofagasta. ``I'd gladly take a job at Escondida.''


Pool, Theatre

The union's strike headquarters, where the vote is scheduled to take place, sparked hostility, too. Workers have occupied BHP's community center, an annex to the company's regional headquarters that boasts a pool, theatre and sports facilities, and set up tents in the parking lot where more than half the vehicles are four-wheel drive pickups.

The surrounding fence is festooned with union flags and protest banners with such slogans as ``bloodsucker, let go of the $''. At night, behind the barricades, strikers can be seen playing tennis on well-lighted clay courts.

``Are they on strike or vacation?'' asked Jessica Castillo, 34, a mother of four as she watched her 12-year-old son play soccer at a small sand-pitch stadium beside rail-yards full of copper plates.

During the strike carloads of young men would drive past the protest site shouting obscenities at the strikers and calling on them to ``go back to work.''

Carlos Allendes, 43, a striking dump-truck driver and his comrades on the picket line make no excuses for their demands, salary or benefits. The miners' agreed to their three-year contract when the price of copper was 80 cents a pound, he said. Copper which fell to $3.35 a pound yesterday, reached an all- time high of $3.92 a pound on May 11.

China to Launch Commodity Pricing System


BEIJING, Aug 31, 2006 (AP Online via COMTEX) -- China will have its companies carry out unified price negotiations with foreign suppliers of oil, copper and other commodities to get better deals, a government newspaper said Thursday.

The system will draw on China's recent experience in trying to negotiate lower prices with foreign iron ore suppliers, the Economic Daily said, citing Wei Jianguo, a deputy commerce minister.

The report said the system would be launched as soon as possible but didn't give a timetable or details of how the system would work.

China is one of the world's biggest importers of oil, iron ore and other raw materials.

"In terms of imports, we are big buyers, but we lack the ability to set international prices," Wei was quoted as saying.

Copper scarcity has led to price rises over the past couple of months.
Therefore, expect a downturn in metal prices when official notification
of end-of-Escondida-strike hits the newswires later today and production
rate returns to normal.

It would be advisable to offload metals until after the dust has settled
later today and come back tomorrow to review the situation.

31 August 2006

LONDON (SHARECAST) - Credit Suisse has cut its view on the steel sector to market weight from overweight warning that the industry is about to enter a cyclical downturn.

The Swiss broker did offer a ray of light though, saying Anglo-Dutch steel maker Corus is one stock that should remain interesting going into a macro slowdown.

Chalco Cuts Alumina Price 22%, in Line With Imports (Update1)

By Chia-Peck Wong

Aug. 31 (Bloomberg) -- Aluminum Corp. of China Ltd., the world's second-biggest alumina producer, will cut the price of the raw material used to make aluminum by 22.4 percent tomorrow, the second time in a month that the company lowered the price.

The company, known as Chalco, will cut the alumina price to 3,800 yuan a metric ton ($478), the same level as the imported price, from 4,900 yuan, to bring them in line, the Beijing-based company said in an emailed statement today. Chalco last cut prices by 13 percent on Aug. 4.

Alumina prices have dropped 56 percent since March to $275 a ton, according to data from Metal Bulletin, as companies increased production to meet China's rising demand for the raw material refined from bauxite. China relies on imports for about half of its alumina demand, while Chalco and smaller producers supply the rest.

China's domestic alumina production surged 50 percent to 7.1 million tons in the first seven months this year. China, the world's biggest producer and consumer of aluminum, imported 3.95 million tons of the raw material during the same period.

31 Aug 2006
bbj.hu

Russia to create world's biggest aluminum maker


Russia's two biggest aluminum companies plan to combine, creating the world's largest producer of the metal and giving President Vladimir Putin influence over world aluminum prices. Putin approved a proposal for OAO Russian Aluminium, known as Rusal, to buy smaller rival OAO Sual Group, said a presidential spokesman who asked not to be identified because the accord hasn't been announced. Swiss commodity trader Glencore International AG's alumina assets will also be included in return for a stake in the new company, he said. By adding Sual, valued at $3.3 billion on Russian stock exchanges, Rusal owner Oleg Deripaska will create a company that pours more aluminum than Alcoa Inc., now the world leader. The government's long-term drive has been to establish national champions, as we have seen in energy, said Tim Brenton, political analyst at Renaissance Capital in Moscow. It's Russia's long-term strategy to project power abroad through these companies. Rusal, Sual and Glencore signed a non-binding accord Aug. 25, the Financial Times reported earlier yesterday. Rusal, controlled by Deripaska through his holding company, Basic Element, will buy Glencore's alumina assets by issuing new shares and will own 64.5 % of the new company, with Sual 21.5% and Glencore 14 % respectively, the FT said.

Soaring commodity prices have caused metals and mining companies worldwide to consolidate, with more than $100 billion of takeover offers made this year. Aluminum prices today rose 1% to $2,495 a metric ton, up 9.6% this year, trailing the 71% jump in copper and a more than doubling in nickel. Aluminum's gains have been limited as China, the world's largest producer and consumer of the metal, raised production and curbed imports. The combined Russian companies would produce about 11% of the world's aluminum, excluding recycled material. Consolidation in metals follows Putin's drive to place energy assets under the state-controlled oil and gas companies, OAO Gazprom and OAO Rosneft Oil Co. Putin met Deripaska three weeks ago, one of the Russian leader's regular gatherings with the country's most powerful businessmen. Rusal's owner was added yesterday to the committee organizing Russia's bid to host the 2014 Winter Olympics in the Black Sea resort of Sochi. We expect and hope that Mr. Deripaska will take the combined company public, said Vladimir Zhukov, senior analyst at Alfa Bank in Moscow. He'll make much more money having his company public.

Combined, Rusal and Sual produced 3.71 million tons of aluminum last year, surpassing the 3.55 million tons at New York-based Alcoa. Alcoa, with 2005 revenue of $26.2 billion, will remain the largest by sales. The Russian companies had combined sales last year of $9.4 billion, based on data posted on the companies' Web sites. Rusal has been seeking to acquire companies that produce alumina, the raw material used to make aluminum. Glencore, the world's largest commodities trader, buys and sells base metals including aluminum, nickel, copper, zinc and lead. The company had sales of $91 billion in fiscal 2005, up from $71 billion a year earlier, and has stakes in mines, smelters and metals refineries.

Rusal is short of bauxite, the raw material refined into alumina. Sual, which produces two-thirds of Russia's bauxite, doesn't have enough capacity to process all of it into aluminum. By acquiring Glencore's aluminum assets, Rusal will gain alumina production in Jamaica and Ireland, which can produce about 4.75 million tons a year. About two tons of alumina are used to produce one ton of aluminum. Alfa's Zhukov said the deal represented an ideal way for Glencore to get cash for its aluminum business. Rusal needs the security of alumina supply, said Peter Richardson, chief metals economist at Deutsche Bank AG, in Melbourne. Any merger will go far in entrenching Rusal's growth in alumina. Russia benefits from low prices for energy, which generally represent 25% to 40% of the cost of producing aluminum. Rusal's two biggest smelters get their electricity from Soviet-built hydropower plants.

Putin is using cash from record oil prices to increase Russia's industrial power and boost state control of key industries. Oil and gas assets are being consolidated into state-controlled Gazprom and Rosneft, while state-owned weapons exporter Rosoboronexport said Aug. 12 it has agreed to buy VSMPO-Avisma, the world's biggest titanium producer. Government support also extends to private business. Putin backed a plan in May for steelmaker Severstal to merge with Luxembourg's Arcelor SA, creating the world's biggest steel company. The merger fell through in June when Mittal Steel Co. won the takeover battle. Deripaska is Russia's sixth-richest man, with a fortune Forbes magazine estimates at $7.8 billion. He has extensive interests in the automotive industry, owning OAO GAZ, a producer of light commercial vehicles which bought British van-maker LDV Ltd. on July 31. Sual is owned by Viktor Vekselberg, Russia's fourth-richest man with $10 billion, according to Forbes. The combined company may sell shares in London within three years, the FT said. It will be chaired by Brian Gilbertson, the former BHP Billiton Ltd. chief executive officer who heads Sual, and run by Rusal CEO Alexander Bulygin, the newspaper reported.

Rusal announced yesterday it plans to complete a buyout of minority shareholders in its Russian plants by the end of this year. The plan includes the Krasnoyarsk, Bratsk, Novokuznetsk and Sayanogorsk aluminum smelters, the Achinsk and Boksitogorsk alumina refineries, and the All-Russia Aluminium and Magnesium Institute, the company said. Sual shares last traded on Aug. 28, when they fell 1.5 % to $1.29. Rusal's 7.2% ruble-denominated bonds advanced 0.1 or l ruble per 1,000 rubles ($37.40) of face value on the Micex exchange in Moscow as of 3:58 p.m. The yield declined 0.05 percentage points. (Bloomberg)

1 September 2006 - Copper, nickel prices may plunge, Westpac forecasts

Source: Bloomberg


Copper, nickel and other base metal prices may plunge next year as slower U.S. growth curbs demand and mine supplies increase, Westpac Banking Corp. says.

The spot price of nickel, used to make steel rustproof, could decline 38.5 percent next year while copper, used in wires and pipes, could fall 29.2 percent, the Sydney-based bank said in its quarterly commodities report sent by e-mail today.

The Reuters/Jefferies CRB Index of 19 commodities fell to a five-month low yesterday, and is down more than 10 percent since reaching a record on May 11. The U.S. said yesterday gross domestic product growth slowed to an annual rate of 2.9 percent in the second quarter from 5.6 percent in the first three months.

"The key for us is the downturn in U.S. dwelling activity and the impact of a more cautious U.S. consumer," Westpac's economists including Justin Smirk said. "In 2007, industrial production growth will turn from being a pillar of base metal price inflation to a drag."

Commodities have rallied since 2001, led by demand from China and the U.S. for raw materials to build homes, autos and appliances, and as decades of underinvestment in mines led to supply shortages. Prices also surged as investment funds, helped by low interest rates, bought metals seeking better returns than bonds and stocks.

Metals prices would peak this year and fall "through 2007 as demand growth slows and supply growth gathers momentum," Westpac said. Copper futures in London rose to a record $8,800 a ton in May, and nickel for three-month delivery surged to $29,950 this month, its highest level in at least 19 years.
Falling prices

A survey of brokerages and research companies by Canberra- based Access Economics in July showed analysts expect commodities prices to fall as much as 45 percent over the next two years, due to expanding capacity.

Spot copper prices could average $6,744 a ton this year, before falling to $4,775 in 2007, according to Westpac's forecast. Copper for immediate delivery in London has averaged $6,491.72 this year.

Spot nickel prices could average $22,919 a ton this year, and drop to $14,100 in 2007, the bank said. Nickel has averaged $20,118 so far this year. Aluminium prices could average $2,526 a ton, and then decline to $2,175 next year, Westpac said.

Westpac raised its base metal prices forecasts by an average 6.5 percent for this year due to supply disruptions as companies including BHP Billiton Ltd., the world's largest miner, had to halt production due to strikes.
Inventories

Commodity prices will "broadly track sideways to the end of 2006," Westpac said. Low inventories and supply disruptions caused by strikes mean prices could still spike, it said.

"Given that inventories are expected to remain below critical levels until 2008, base metal prices remain hostage to small movements in inventories for some time," the bank said.

Rising interest rates globally will help to slow raw materials demand, Westpac's report said. The U.S. Federal Reserve raised interest rates 17 times over two years before pausing on Aug. 8. New home sales in the U.S. fell more than expected in July, and the number of unsold houses climbed to a record, according to government data on Aug. 24.

The Bank of Japan raised interest rates in July, the first time it has done so since August 2000. The European Central Bank has raised borrowing costs four times since early December.

Westpac's view doesn't tally with that from Charles "Chip" Goodyear, chief executive officer of BHP, who said Aug. 23 that while the U.S. economy would slow, the impact would not be significant.

"The U.S. is quite a service-based economy, and so there will be a slowdown there and it will have some impact. But again, we expect it to be moderate," Goodyear said. There's "still, a very strong environment, particularly given the supply side."

Slowing growth in the U.S. may be offset by continued expansion in Europe and Japan, Goodyear added.