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!