Source: Dow Jones 2 June 2006

Copper fabricators seek alternatives after rally


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

like???

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

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

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

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

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

All IMHO of course !!!!

Ian

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

Source: Dow Jones


Copper Concentrate Catalog

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: Dow Jones


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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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


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

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

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

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

Grupo Mexico Warns of Closing Copper Mine



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

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

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

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

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

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

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

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

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

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

Daily Telegraph June 9

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

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

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

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

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

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

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

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

Higher Risks

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

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

Commodities: Gold keeps sliding

Fri 09 Jun 2006
LONDON (SHARECAST) -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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



"Business The Times June 10, 2006

Rising US import bill adds to jitters on Wall Street


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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