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.