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.