Source: Dow Jones - 11 July 2006

Buoyant on stocks, supply concern, oil hike: LME


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

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

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

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

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

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

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

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

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

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

DOW JONES NEWSWIRES - 11 July 2006


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

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

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

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

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

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

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

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

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

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

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

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

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

Blimey!

Wed Jul 12, 2006

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


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

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

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

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

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

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

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

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

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

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

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

Source: (Dow Jones - 12 July 2006

Base metals supply constraints underpin markets Goldman


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

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

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

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

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

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

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

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

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

Certainly the area to be in at the moment IMHO.

July 13 (Bloomberg)

Copper Declines in London, Shanghai as Charts Give Sell Signals


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

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

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

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

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

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

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

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

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

Mining Weekly - 13 July 2006

Copper breaks $8 000, at six-week high


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

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

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

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

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

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

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

Nickel stocks in LME warehouses fell by a further 174 tons on Wednesday to 8 244 tons, the lowest since August 2005, and only a little more than two days of global use.

Nickel and copper miners were very much in demand.

Xstrata sweetened its hostile offer for Canadian metals miner Falconbridge on Tuesday, complicating a bidding war that includes a friendly offer from compatriot Inco backed by Phelps Dodge of the US Xstrata shares were up five percent in London by 1231 GMT, with mining stocks including Anglo American and Rio Tinto also outperforming the FTSEurofirst, a broad index of 300 stocks.

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

Asia Pulse Data Source via COMTEX - July 13, 2006

Sharp rise in metal prices


Led by nickel, metal prices firmed up sharply on the non-ferrous metal market here today on good stockists demand in view of rise in the London Metal Exchange (LME).

Nickel rose by Rs 20 per kilo to Rs 1280 from Rs 1260 yesterday, followed by copper cable scrap by Rs 10 per kilo to Rs 390, copper scrap heavy to Rs 380, copper armeture to Rs 368, copper utesnils scrap to Rs 340, copper wire bar to Rs 418 and copper sheets cutting to Rs 360.

In LME, metal prices were buoyant responding to supply concerns, falling stocks and rising oil prices boosting sentiment across commodity markets.

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

LME copper rose to a five-week high of $7,977.50/ton.

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

July 12 2006 - By Philip Coggan, FT Investment Editor

The Short View: Time to hop back on the bandwagon


Commodities have resumed their upwards march. Nickel touched a record high of $26,000 a tonne on Wednesday while copper bounced back over $8,000. Gold, partly bolstered by the Mumbai bombings and by renewed Middle East tensions, reached $650 an ounce. Mining stocks are leading the equity performance tables.

The bounce-back in commodity prices reflects greater investor confidence about the outlook for global growth, partly because the US Federal Reserve is expected to stop tightening and partly because economic data in Asia and Europe still look robust.

Demand from China is universally assumed to be the long-term driver for commodity prices. But has it been behind the recent revival? Graham Turner of GFC Economics points out that, while Chinese imports rose 18.9 per cent year-on-year in June, after seasonal adjustment, the first-half gain was just 4.9 per cent.

If one strips out rising prices, the statistics look even more remarkable. According to Turner, Chinese imports of iron ore fell 5.5 per cent in the six months to May while copper imports fell a remarkable 57.4 per cent, year-on-year, in real terms.

Those numbers are in stark contrast to the 10 per cent-plus GDP growth that China is expected to announce in the first half. Many outsiders are suspicious of the rather smooth upward progress displayed by Chinese GDP in recent years. Tatha Ghose of Dresdner Kleinwort has put together an alternative set of data, based on industry-specific statistics, which indicate that Chinese manufacturing and capital expenditure have slowed significantly in recent months.

That slowdown could have sparked the commodity sell-off in May and June. And if the commodity sell-off led to a general retreat in risky assets, then we have a new potential culprit for the market correction not the Federal Reserve, or the change in Japanese monetary policy, but a moderation in Chinese activity.

Dresdners indicators also suggest a rebound for Chinese activity is now in prospect. So the recent pick-up in commodity prices could be seen as confirmation of that change in trend. And, now that prices are moving higher, speculators have every incentive to jump on the bandwagon again.

LONDON, Jul 14, 2006 (XFN-ASIA via COMTEX)

Base metals were higher, led by copper, zinc and nickel, which continue to find support from dwindling stockpiles, labour disputes and production problems at key mines.

Analysts warned, however, that the escalating crisis in the Middle East could dampen sentiment if surging oil prices hurt economic growth and therefore base metal demand.

At 3.40 pm, LME copper for three-month delivery was at 8,070 usd a tonne, up from 7,920 at the close yesterday, while nickel was at 26,000 usd a tonne against 25,250.00 usd.

Other metals were also higher. Zinc was at 3,490 usd against 3,420 usd yesterday, tin was at 8,775 usd against 8,700 usd and aluminium was at 2,625 usd against 2,605.

Source: Dow Jones - 14 July 2006

Copper concentrates deficit to force smelter cuts-Analyst


The largest ever copper concentrates deficit is driving treatment and refining charges lower and will lead to smelter cutbacks in Asia, according to analyst Peter Hollands at Bloomsbury Minerals Economics.

In mid-June, China's eight largest copper smelting companies were reported to be planning a 10% cut in their cathode production in the second half of 2006, if TC/RCs didn't recover to a "reasonable level," Hollands said.

He noted talk that the Chinese Copper Smelter Purchase Team has requested the Ministry of Commerce not to issue import licenses for other concentrates contracts at TC/RCs below $100 a metric ton and 10 cents a pound.

A 290,000-metric-ton deficit is what has pushed spot TC/RCs from $140/ton and 14 cents a pound last December to $70/ton and 7 cents/lb in May, Hollands said. Then in June, aggressive merchant buying drove TC/RCs down to the $28-$40/ton and 2.8-4 cents/lb range, he noted.

"The Chinese were outraged and ceased buying, seeking at least $100/ton and 10 cents/lb. That steadied the market and smelters are now getting $85/ton and 8.5 cents/lb, spot," he added.

"That very firm position by the big eight Chinese smelters ended the episode of aggressive merchant buying for nearby and far-forward delivery from mines," Hollands noted.

And in negotiations for July 2006-June 2007 annual smelting contracts, a fierce battle is believed to be under way, Hollands said.

"One large producer is said to be trying greatly to cut or perhaps even (eventually) to eliminate the price participation clause in term contracts," Hollands said.

"The possibility exists of more single-year holidays being taken in these multi-year frame contracts. If any smelters concerned then cut production rather than buying spot, refined copper supply in Asia could be cut sharply, driving up Shanghai (and other) prices and Asian premiums sharply," he added.

Hollands said Bloomsbury expects a round of smelter cutbacks both from Chinese plants withdrawing from the spot market and other Asian smelters holidaying from term contracts.

In 2007, Bloomsbury sees the concentrates market in a 34,000-ton surplus, dropping to a 23,000 tons surplus in 2008.

July 14 (Bloomberg)

Copper Rises on Concern Output at World's Largest Mine May Drop


Copper rose in London, heading for a third straight weekly gain, amid concern that a pay dispute at the world's largest mine may lead to reduced production.

Miners at Escondida in Chile plan to strike next month if unions and management fail to reach a wage accord. Workers introduced ``go-slow'' tactics at the mine on July 7. Escondida accounted for 8.5 percent of global mine output last year, according to data from Chile and mine owner BHP Billiton.

``Copper's strong and likely to remain strong ahead of the Escondida contract,'' said William Adams, a Saffron Walden, England-based analyst at metals information company Basemetals.com.

Copper for delivery in three months on the London Metal Exchange rose $180, or 2.3 percent, to $8,100 a metric ton as of 10:20 a.m. local time. It has gained 4.6 percent this week.

Copper output has already been cut this year by strikes at mines in Mexico and faltering metal recoveries at mines in Zambia and Indonesia. Stockpiled copper, which consumers may use to fill a forecast production shortfall this year, has also slumped in the last month.

Inventory monitored by the LME gained 0.6 percent, the exchange said today, to 94,100 tons. Still, it has fallen 16 percent since June 1 and is now equal to about two days of global consumption.

``Any strike action would soon eat into the stock level,'' Adams said.

Among other LME metals, aluminum gained $30 to $2,635, lead rose $40 to $1,170, tin was $175 higher at $8,095 and zinc gained $110 to $3,530.

Nickel climbed $650 to $25,900 after inventories of the metal used to make stainless steel dropped the most since August 2004. Inventory monitored by the LME fell 14 percent, the exchange said today. Stockpiles have dropped 82 percent this year to 6,582 tons, the lowest level since May 18, 2005.

``Until we see any sustained turnaround in inventories, it's difficult to get bearish,'' said Neil Buxton at London- based GFMS Metals Consulting Ltd. The high prices ``are not choking off demand at all,'' he said.

Dow Jones Newswires - 14 Jul 2006

By Allen Sykora


Labor has been a major issue for the copper market so far in 2006 and could become an even bigger one in the weeks ahead, with the potential for a strike looming against Chile's Escondida, analysts say.

A long-running strike against Grupo Mexico (GMEXICO.MX) is continuing, and the apparent distance between the Escondida union and management contract offers has left the market expecting a strike by a roughly 60-40 margin, reported Robin Bahr, analyst with UBS. This comes at a time when global supplies are historically low.

"Labor issues are extremely significant and have been this year," Bahr said. "In the first four months of 2006, there was more disruptions and copper lost to the market than the whole of 2005, particularly with the long-running strike at Grupo Mexico, which remains unresolved."

"The thing that has fired up the imagination of bullish traders is the fact that the Escondida mine is the largest in the world," said Dan Vaught, futures analyst with A.G. Edwards.

Escondida produced 1,271,472 metric tons of copper a year ago. Total global refined production was roughly 16.433 million metric tons, according to a report earlier this year from the International Copper Study Group.

Thus, Escondida accounted for roughly 7% of the global market last year, making it the world's largest mine "by quite a margin," said Bahr.

And that, obviously, makes the labor situation at the mine crucial for the copper market. Even if a strike lasts for only one month, this would cost 100,000 tons of production, said Bahr.

"To put that into perspective, there is less than that in LME warehouses," he continued.

Data released by London Metal Exchange early Friday showed that warehouse inventories rose 525 metric tons to 94,100 metric tons. Comex stocks stood at 7,510 short tons Thursday.

"Between the major two exchanges, you've got the same amount (approximately in storage) as would be produced by Escondida in one month," said Bahr.

After copper prices hit record highs this spring, the union has sought a 13% raise, while the company offered 1.5%. A union official says it has begun a work slowdown and that a strike is "imminent."

The market is "anxious" as the countdown toward the Aug. 2 contract expiry continues, said Bahr, estimating that perhaps 60% of the market is looking for a strike.

"People are expecting one only on the basis of the last few weeks, negotiations appear not to have gone too well and both sides appear far apart," he said. "But, having said that, negotiations will be more crucial toward expiry of the contract at the beginning of August."

A "significant portion" of copper's gains over the last two weeks or so are due to anticipation of a possible Escondida strike, explained Vaught.

September copper, traded on the Comex division of the New York Mercantile Exchange, has risen from a two-month low of $2.9145 a pound on June 14 to a six-week high of $3.7700 on Wednesday, a gain of 29%. Three-month copper on the London Metal Exchange has risen from around $6,410 to $8,210 a metric ton during that time.

Some buying by speculators and other market participants has already occurred in anticipation of a strike, yet a labor disruption is not fully factored in, meaning more gains are possible, said Bahr.

"If the strike were to take place and news were to hit the market, then you would see a strong knee-jerk response in prices," said Bahr.

Vaught pointed out that the Grupo Mexico La Caridad strike that began in late March was one of the catalysts that had helped copper jump from around $2.25 a pound to roughly the $4 area.

"You still have the La Caridad and another mine (Cananea) closed," he said. "So with the prospect of an even larger mine (Escondida) going on strike in early August, that holds pretty major bullish implications."

Chile's mining industry will remain in focus this fall, when contracts at some Codelco divisions are due to expire, added Bahr.

"That will have the potential, as much as Escondida, to really provide anxiety in the market," he said.

Ana Rebelo, chief statistician with the International Copper Study Group, provided data showing that Chile is the largest copper-producing country in the world.

Chile has annual capacity of roughly 5.5 million metric tons, out of a global capacity of 16.6 million, she said. Escondida has capacity of some 1.2 million metric tons, while the combined Codelco operations have capacity of 1.4 million metric tons, she reported.

Workers have been on strike against Grupo Mexico's two largest copper mines - La Caridad and Cananea. Union officials are demanding government support in an ongoing dispute over union leadership.

The La Caridad strike began March 24, and the company has said that the mine could be shut down in the not-too-distant future if the strike continues. On June 2, workers also went on strike at the Cananea mine.

Daily research reports from UBS and Man Financial note that Grupo Mexico has told clients that it will struggle to meet orders in August if strikes at its Mexican mines are not resolved. The company had declared force majeure on copper deliveries in recent months because of the strikes, although it has until now managed to meet most contracts, analysts said.

"There is also a contract coming up for renewal in Peru at the Antamina mine," Bahr reported.

A contract between workers and the mine, which is owned by a consortium of countries, expires July 24. However, Barclays and UBS research reports note that a union official has expressed optimism that an agreement could be reached without a strike.

"There are other labor tensions in Zambia," said Bahr. There have been slowdowns and various protests, although there is no actual strike occurring, he explained.

However, an agreement on a new labor contract was reached this week at the country's largest copper producer, Konkola Copper Mineshave, a union official reported. The old contract had expired June 30, but was extended three months while talks continued.

The worries about supply disruptions come at a time when global inventories are already at historically low levels - with LME stocks at 94,100 metric tons, Comex supplies at 7,510 short tons and Shanghai Futures Exchange inventories at 61,120 metric tons.

These inventories account for only a few days worth of global demand, pointed out Vaught.

"Not only are LME stocks for some metals at or are near critically low levels but those held throughout industry at metal exchanges, producers, consumers and merchants are telling a similar story," said Bahr.

He estimated total industry stocks of copper amount to only 2.4 weeks worth of global consumption. Supplies of other base metals are also tight, particularly nickel and zinc.

"The implication for those tight metals is clear - any supply interruptions will feed straight through to prices given the lack of an adequate cushion or buffer, with consumers remaining anxious about actual physical availability of metal," said Bahr. "With supply growth limited over the next 12 months, there is likely to be little opportunity for these stocks to be rebuilt to more comfortable levels."

July 17 (Bloomberg)

Copper Rises in Shanghai on Speculation Fund Buying to Continue


Copper prices in Shanghai rose amid speculation that investment and hedge funds may continue to buy the metal amid concerns that strikes may cut supply.

Workers at Grupo Mexico SA, the world's seventh-largest copper mine, resolved a strike at Cananea mine, restarting operations that were shut since June 1, Mexico's miners union said today. Still, this resolution doesn't mean that funds will sell, said analyst Wang Zheng, citing concern about a possible strike at Escondida, the world's largest copper mine.

``The definitive impact on prices is how funds will react to such news,'' Wang, a metal analyst at Shanghai Dalu Futures Co., said by phone today. ``In addition, there are possible labor disputes arising in the next one to two months, so I don't see the funds leaving the market just yet.''

Metal for September delivery rose as much as 1,320 yuan, or 1.9 percent, to 72,690 yuan ($9,090) a ton on the Shanghai Futures Exchange. It traded at 71,890 yuan at 9:40 a.m. local time.

Escondida's management has offered a rise of 1.5 percent above inflation, the same increase the company made three years ago. Output at the mine has fallen 10 percent below normal since workers started following safety procedures to the letter on July 7, labor union spokesman Pedro Marin said on July 12.

The mine's production may drop a further 15 percent unless BHP Billiton, which operates the mine, improves the wage offer, Metal Bulletin reported on July 14, citing Marin.

Shanghai Copper Gains as Traders See Pause in U.S. Rate Rises

July 20 (Bloomberg) -- Copper prices in Shanghai rose as some traders interpreted comments from the Federal Reserve chief to mean there'd be pause in interest rate rises, allaying concern higher borrowing costs may slow demand for the metal.

Policy makers must be wary of lifting interest rates too far, Fed Chairman Ben S. Bernanke told the Senate Banking Committee in Washington yesterday. Shanghai copper prices, which have doubled in the past year, are down about a fifth from a record high on May 15 partly on concern demand growth would slow in China and the U.S., the world's top users, as rates rose.

``After Bernanke's speech, the market thinks it is less likely that the Fed will raise interest rates in August,'' Cai Luoyi, metal analyst at China International Futures (Shanghai) Co., said. That's ``weakening the dollar and supporting copper prices.''

Metal for delivery in October rose as much as 1,370 yuan, or 2.1 percent, to 67,500 yuan ($8,445) a metric ton on the Shanghai Futures Exchange, after falling by the daily maximum allowable limit in the past two days. It traded at 66,870 yuan by midday break at 11:30 a.m. local time.

Copper for cash delivery in Changjiang, Shanghai's biggest spot market, rose as much as 1.3 percent to 65,850 yuan a ton. Chinese users have to pay 17 percent value-added tax, 2 percent import tax, premiums and freight charges for imported copper.

The dollar fell for a second day after Bernanke's remarks, and on speculation that minutes of the Fed's last meeting, due for release later today, will show policy makers considered stopping a two-year campaign of raising interest rates. A weaker dollar makes copper, traded internationally in the currency, cheaper for users outside the U.S.

Dollar Declines

Ending the policy of raising borrowing costs may dull the appeal of U.S. assets compared with those of Europe and Japan, where central banks are lifting rates. The dollar yesterday fell the most in three weeks against the euro and dropped versus the yen after Bernanke's testimony.

Copper for delivery in September fell 0.5 percent to $3.575 a pound on the Comex division of the New York Mercantile Exchange at 12:12 p.m. Singapore time in after-hours trading.

The metal for three-month delivery fell as much as $94, or 1.2 percent, to $7,700 a metric ton on the London Metal Exchange, and traded at $7,755 at 12:13 p.m. Singapore time.

LONDON, July 20 (Reuters)

Vedanta Q1 core earnings up 280 pct to $589 mln


India-focused miner Vedanta Resources Plc (VED.L: Quote, Profile, Research) posted a 280 percent rise in first-quarter core earnings on Thursday, buoyed by booming metals prices, and said underlying demand for its commodities remained strong.

London-listed Vedanta said in a statement its earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $589.1 million in the three months to end-June, on revenues up 113 percent to $1.286 billion.

Mining Weekly - 20 July 2006

Zinc shortfall was 120 000 t in first 5 months


Zinc supply fell short of demand for the first five months of the year, because of higher consumption of the metal used to galvanize steel, the International Lead and Zinc Study Group said.

Zinc production was 120 000 tons less than demand, compared with a shortfall of 98,000 tons a year earlier, the Lisbon-based group said in a report on its Web site today. The group is funded by the governments of producing and consuming countries.

Demand rose 2,4% to 4,47-million t, the group said. Production grew 1,9% to 4,35-million t.

Source: Dow Jones - 20 July 2006

Copper sell-off by funds; Fundamentals sound: LME



London Metal Exchange three-month copper slumped Thursday as liquidation by commodity-trade advisory funds pressured prices back 6% below previous kerb levels, traders said.

Copper prices fell in $100 "gaps" in the run-up to late kerb in London on very little volume, ending the afternoon session down $430, or 5.5%, on previous kerb levels at $7,350 a metric ton.

"A late spell of liquidation by the speculative community knocked prices down but it's left people scratching their heads," said a broker.

Despite losses, market participants agree copper prices remain firmly underpinned by potential supply-side concerns including contract negotiations at major copper producers such as Codelco and Teck Cominco.

The union at Codelco's Escondida operations is to meet with management later Thursday to start negotiations ahead of their workers' Aug. 2 contract expiry.

"They've agreed to meet which is a good sign but, that alone, is not going to make investors sell," said a trader.

The possibility of a workers' strike at Teck Cominco Ltd.'s Highland Valley copper mine in Canada is also being closely watched by the market. Unionized workers have said they might decide to strike if they can't agree to a new wage deal by Oct. 1.

Dow Jones Newswires - 20 July 2006
DJ BASE METALS UPDATE:New Chile Copper Strike Threat -Report


Chile Codelco Contractors Threaten New Strike - Report

SANTIAGO (Dow Jones)--Unionized contract workers at copper giant Corporacion Nacional del Cobre de Chile's Teniente and Andina divisions are threatening to go on strike again, El Mercurio newspaper reported Wednesday.