BASE METALS

COPPER PRICE JUMPS ON LSE, SHFE
Chilean copper mines slowly resume operations as power supplies return
Despite the 8.8 earthquake and resulting power shortages, copper mines in central Chile have begun resuming operation. However, copper markets are still somewhat nervous.
Author: Dorothy Kosich
Posted: Monday , 01 Mar 2010
RENO, NV -
Chile's largest mines are apparently undamaged, but the potential for disruptions on deliveries from the mine and interruption of power supplies--caused by a massive earthquake that killed more than 700 people and displaced two million-appeared to already impact copper prices early today.
Copper jumped to its highest level in five weeks on the LME early this morning.
Copper for three-month delivery surged as much as 5.6% to $7,600 a tonne, the highest price since January 20th. The contract traded at $7,462 a ton at 11:44 a.m. Monday in Shanghai.
Despite the earthquake, the world's largest copper producer, state-owned Codelco, said it will meet its supply contracts.
The company had closed its El Teniente complex and Andina mine due to power outages, while Anglo American shut its Los Bronces and El Soldado mines. However, Codelco said El Teniente had resumed operations and Andina operations were expected to resume late Sunday.
Suspension of production at these four major mines could have impacted about 20% of Chile's copper production.
Codelco's Caletones smelter was also expected to resume operations Sunday.
Freeport-McMoRan Copper & Gold said that while the quake did not damage its mines, the power failure at its Candelaria mine would result in a temporary shutdown.
Damages to bridges, roads and ports are still being assessed as of Mineweb's deadline early Monday morning. If the infrastructure damage were severe enough, it may interfere with the ability of copper producers to transport metal to the market.
It might also slow the pace of Chilean exports of which half are believed to be copper.
However, Standard Bank said in a note Monday that "apart from mine production of copper, copper exports from Chile look to be largely unaffected."
While port activities at San Antonia are closed, the larger and more important ports of Antofagasta and Mejillones were unaffected by the quake. As long as ports are open, the export of copper from Chile may see little disruption.
Meanwhile, mines in northern Chile appear to be operating normally. BHP Billiton said its copper mines weren't affected, while a Codelco spokesman said its northern Chilean mines are operating normally.
Barrick, Kinross and Teck said all their mines were operating.

s copper a buy or a sell?
With prices for the red metal at 15-week lows and concerns about the Euro zone and China's slowing economy fresh, analysts are divided in their answers
Author: Barani Krishnan (Reuters)
Posted: Tuesday , 18 May 2010
NEW YORK (REUTERS) -
Copper prices were at 15-week lows on Monday, a month after hitting their highest levels for the year, prompting questions on how much further they could sink on fears over the euro zone crisis and China's slowing economy.
The metal, used in construction and power and a bellwether for the global economy, rose 10 percent from last year's close to touch around $3.63 a lb in New York futures trade HGc1 on April 12 after strong imports from top consumer China.
From thereon, it tumbled, breaking the key $3 support in Monday's market and closing down about 6 percent -- its worst one-day decline since February 2009.
Copper for three-month delivery in London CMCU3 fell from the year's peak above $8,043 a tonne to a bottom below $6,430 a tonne on Monday.
Analysts said the market collapsed after signs that China's economic growth had peaked unnerved investors already bracing for potential sovereign defaults out of Europe.
Traders pushing for a further sell of copper say the market's loss of two fundamental legs of support -- China and Europe -- means that prices could break below $2 per lb - a level not seen since the depth of the recession.
Those pressing the case for copper, however, think the market's been oversold and due for a rebound on strong physical demand that could emerge below $2.60 a lb.
SELL
"It looks like a sell," said Steve Platt, futures analyst at Archer Financials in Chicago. "The fact is you've got a surplus supply in copper and it should have never got to three bucks, but then you had every speculator and his mother thinking it deserved to go higher."
Platt said although the market wasn't exactly facing the type of pressure it did during the worst of the financial crisis, when copper traded at below $1.30 a lb, "the situation in Europe is threatening to get just as bad".
Frank McGhee, head precious metals trader at Chicago's Integrated Brokerage Services, agreed with that.
"I can see the market going back under $2," McGhee said.
"There is extreme uncertainty over Europe and you're seeing the Chinese stock market come off, following their internal economy down. You're losing two legs of support and it's telling me we're coming into a much slower period of economic activity."
Sterling Smith, analyst at Country Hedging Inc in St Paul, Minnesota, was in the sell camp too.
"I would only buy it if I were covering a short position," Smith said. "The outside markets are looking rather peaked and I don't think people are aggressively looking to buy copper here as it's an extreme hazard to try for limited gains."
BUY
Matthew Zeman, head of trading with LaSalle Futures Group in Chicago, thinks the market will catapult back to the $3 a lb level over the next couple of weeks.
"I think right now it's probably a buy and the selling looks a little overdone to me," Zeman said.
"We could go to as low as $2.70 but I think we'll probably trade back at above $3.10 somewhere there over the next week or so. The fears over the euro zone I think are very real but I also think people are exiting copper just on panic."
Mike Seery, broker at Olympus Futures in Chicago, was also a buyer. "I still think it's going lower but I wouldn't be selling it down here. I would be looking to accumulate it here soon, probably at $2.60 downwards.
HOLD
David Meger, vice president and director of metals trading at Chicago's Vision Financial Markets in Chicago, said his view was that copper was a hold at current levels.
"Is there more downside here? Yes, there absolutely could be. But there is likely to be some physical demand at some of these levels below $3 that will probably create a little bit of consolidation or sideways trading environment after this sell-off," Meger said.
Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto, also advises a hold on the metal.
"I think prices are going to firm later in the year. The market is expected to go into a supply deficit by 2011 and we could see prices pick. What we are seeing at this point are the trading realities of the market."
(Editing by Marguerita Choy)
© Thomson Reuters 2010 All rights reserved

Barclays predicts higher prices for copper, tin and lead
Barclays Capital research analysts anticipate the implied physical gold balance will improve this year and next due to a slower pace of mine supply growth.
Author: Dorothy Kosich
Posted: Tuesday , 20 Jul 2010
RENO, NV -
Barclays Capital Commodities Research suggests "there is a clear fundamental signal for even higher prices" for copper, tin and lead, while Barclays analysts downgraded their price expectations for aluminum and zinc.
"In precious metals, we expect many of the dynamics that are currently in play to continue to take centre stage in 2011," Barclays analysts forecast in their most recent edition of Metals Magnifier.
"Although we expect gold's implied physical surplus to fall, excess supply will need to be met by investment demand, where for now, appetite is set to remain robust as fears of inflation and the desire to hold a hard asset supports interests," said analysts Gail Berry, Suki Cooper, Roxana Mohammadian Molina, Natalya Naqvi, Kevin Norrish, and Nicholas Snowdon.
PRECIOUS METALS
Gold
Barclays expect the implied physical gold balance to improve this year and next as mine supply grows at a slower pace, but scrap supply eases from its record 2009 high.
"On the demand side we expect jewellery demand and industrial demand to improve y/y; however, the excess supply will still need to be consumed by the investor community where for now demand looks set to remain robust as fears of inflation and the desire to hold a hard asset continue to support investor interest," the analysts noted.
Silver
Meanwhile, silver prices continue to ride on the positive sentiment towards gold. "While underlying industrial demand continues to improve, softer investor interest has limited upside momentum in prices," Barclays observed.
Retail interest remains positive in silver as U.S. coin sales rose by one-third last month and have already exceeded one million ounces thus far in July.
Barclays continues to expect a market surplus in silver this year and next, "driven by both an increase in mine output and scrap supply."
"However, although we expect growth in fabrication demand to outpace supply, the market is set to remain in hefty surplus throughout 2011, leaving upside potential for prices dependent on investor interest, which for now remains supportive," the analysts predicted.
Platinum
In their analysis, Barclays said they expect many of the fundamental trends for platinum in 2010 to continue into next year, "setting the scene for another year in deficit; however, the most significant swing could come from ETP flows, which we forecast to slow yet remain positive next year."
Palladium
Barclays analysts said palladium was the weakest performing precious metal in June. "Total metal held across the five products remains above 1.8Moz, but closed June some 5koz shy of its peak, and holdings have trickled lower in July so far."
While the slowing pace of Russian palladium exports add support to the longer term structure of the palladium market, Barclays analysts said it is too premature to conclude that Russian stock releases have finished.
"Certainly our forecast for 2011 assume slower releases, yet next year this could be offset by a slowdown in growth of fresh ETP demand," they noted, "however, if investment demand continues apace, the [palladium] market could tighten on an annual basis."
BASE METALS
Barclays expect the supply side to be "an important differentiator of price performance, with copper and lead facing among the biggest challenges..."
"Copper mine production growth is likely to struggle, which suggests there will have to be large draws in metals inventories to keep up with even a modest rate of demand growth," they forecast. "As such we see the potential for copper prices to reach a new record high."
Meanwhile, lead mine supply looks tight going into next year, "so without another large jump in secondary production, which we see as doubtful, refined production growth will be constrained," the analysts predicted.
"The outlook for aluminum prices is relatively benign with excess smelting capacity, and ample raw material supply pointing to strong production growth, while costs will provide downside support," they advised.
Barclays downgraded its price expectations for zinc next on the basis of stronger refined production.
"That said, we see potential for significant upside to prices later next year and onwards as mine supply begins to tighten," the analysts noted.
They also see "short-term softness for nickel as stainless demand wanes, but this will be temporary as the supply-demand balance improves through 2011. Mine supply growth looks likely to be weak since we are not optimistic about high pressure acid leach projects."
Copper
In their analysis, Barclays forecasts a copper market deficit of 132Kt this year as "mine supply underperformance remains endemic and is struggling to match demand growth, particularly with Chinese import demand stronger than expected..."
"The picture for this year ultimately reinforces the observation that dips in Q3 10 should be viewed as prime buying opportunities, given that we expect an even deeper [copper] market deficit next year," the analysts advised.
Lead
Meanwhile, the analysts observed, "Supply-side dynamics are becoming increasingly supportive for lead." Cuts to Chinese lead smelter production are likely if concentrate treatment charges remain low. Smelter closures due to drought as well as environmental concerns continue to be factors in lead production.
"Currently, we are forecasting Chinese production to grow over the rest of the year and even with that China is expected to turn into a net importer, so further supply difficulties would pose an upside risk to our positive outlook on lead," Barclays advised.
Interestingly, U.S. lead demand is much strong than European lead demand because it is far more leveraged to the U.S. auto sector, which has performed strongly. Meanwhile, replacement battery demand accounts for the majority of battery demand in North America.
"We expect the [lead] market to be balanced in 2011, as demand growth slows but still remains firm in China, and continues to improve in the rest of the world," the analysts forecast. "Supply is set to grow at a slightly faster pace, as China continues to increase smelter capacity, but concentrate market tightness will be the limiting factor."
Nickel
Nickel prices continued to drift lower through June and this month, weighed by a combination of macroeconomic uncertainties and expectations of a slowing global stainless steel sector in the third quarter.
"In our view, Q3 10 will though witness moderate weight on nickel prices," Barclays predicted. The seasonably slower summer period in the U.S. and Europe contributed to a decline in nickel demand. Combined with the trickle of Sudbury nickel coming back into the market, "LME stock trends should turn less supportive and hence prices soften."
"From that perspective, in the short term, nickel offers the most persuasive downside position in Q3," the analysts asserted. "We would hesitate, however, in extending that view more than temporarily as we believe the stainless sector will ramp back up in Q4 (as China restocks)."
"The failure of the Goro HPAL mine so far means the [nickel] market will remain tight in 2011, when we forecast an essentially balanced market," they added.
Tin
"Tin continues to provide the most robust picture across the base metals complex," Barclays declared.
"While not exempt from the price turbulence over the past month, it is just about the only base metal that has achieved year-to-date price appreciation (albeit extremely modest," the analysts observed. "This reflects, in our view, the fact that the time market is in the clearest global market deficit (8Kt deficit)."
As fundamental conditions are only set to tighten over the next 18 months, the analysts forecast a tin price of $19,500/t in 2011.
"On the supply side, production in the world's largest supplier-Indonesia-continues to underperform," they noted. May exports fell 26% y/y and 16% YTD.
"Likely continued underperformance over the rest of the year has been reinforced by the mid-June closure of one of the largest independent smelters in the country," the analysts observed. ‘The smelter, responsible for 6% of total exports, closed due to squeezing of profit margins."
"In addition, mine supply over the next 1-2 years at least offers few new projects to boost output."
"The tin story is undoubtedly bullish, in our view," the analysts asserted.
Zinc
Cuts in Chinese zinc smelter production "should help slow fast production growth and prevent a build in stocks over the summer," Barclays advised.
While global zinc demand growth is slowing, it still remains very strong, according to Barclays' analysis.
"Production growth is expected to remain strong over the next few quarters, but in 2011 we see a number of potential constraints," the analysts observed. ‘The biggest swing factor will be Chinese mine output."
"We are skeptical that the recent fast pace of growth can be sustained," they warned. "More investment spending is needed with mines likely to encounter lower ore grades and having to go deeper underground."
"With a sizeable slowdown in consumptions growth expected in H2, along with continued robust production growth, we expect [zinc] prices to remain under pressure," the analysts advised. "But as 2011 progresses, we expect a tightening in raw material supply to create a more price positive environment."

Where's the copper to come from to meet future demand?
According to Robert Friedland we need to mine as much copper in the next 20 years as we have in the past 110 - where is this copper to come from?
Author: Lawrence Williams
Posted: Monday , 09 Aug 2010
LONDON -
"We need more copper in the next 20 years than was mined in the last 110 years," Ivanhoe Chairman Robert Friedland is reported as saying at the Diggers and Dealers conference in Kalgoorlie, Western Australia, last week. "Those of us in the business don't have any idea where this metal is going to come from."
Now Friedland, whose Ivanhoe Mines still controls the huge Oyu Tolgoi copper-gold project in Mongolia which is being developed in conjunction with Rio Tinto, may be talking from a biased viewpoint, but he has a point. Once economies recover, even if slowly, copper in particular may well find itself in a major demand squeeze.
Most serious analysts of the copper sector point to declining resources and grades at the world's largest copper mines which are not being replaced sufficiently by new deposits being brought on stream - and those major deposits that are being considered and developed carry, for the most part much lower grades and require huge capital to get them off the ground. There are exceptions - Tenke Fungurume in the DRC for example and other projects in that country - but the political and security situation there still impacts development and slows down the availability of capital from still risk averse banks.
Friedland is a very astute and prescient judge of the mining sector, as well as having the foresight - and the luck - to run companies successful in making major discoveries - Voiseys Bay, Oyu Tolgoi. He deals a hard bargain in offloading his interests to the majors who have the clout, and the capital raising ability, to develop them which does not always make him popular amongst his peers. However in his views on copper most would undoubtedly agree with his analysis. He is a charismatic speaker and audiences tend to hang on his every word, so many attending Diggers and Dealers this year will be enthused for the future of the copper price as a result.
But, it's unlikely to be a smooth ride for copper ahead, whatever the longer term prospects may suggest. Price performance so far this year has been, to say the least, pretty volatile and this pattern is likely to continue as positive, and negative, assessments continue to be made on the state of the global economy on which the copper market is very dependent. China - and reports on speeding up or slowing down of growth there, will be a major factor, as will speculation and running down, or building up, of inventories.
Copper is also vulnerable to disruptions - particularly when the price rises and the copper miners are seen as making excessive profits. Increasingly-aware labour forces demand a higher share of the pot, as do governments strapped for cash to meet their social programmes who see miners as an easy target. Although the backlash against the Australian labor government for trying to bleed the industry, which may well bring it down despite a prior huge lead in the polls, may make other governments think twice. But, there are few areas of the world where mining is seen in such a positive light as Australia where it is given much of the credit, deservedly so, for keeping the country out of the economic hell that has decimated the finances of many of the older Western economies.
Political disruptions may also occur as new mine development moves into countries where political stability is more suspect. The Democratic Republic of Congo (DRC) is one such environment. In the old autocratic Belgian Congo days the country was one of the world's top copper and cobalt producers, but this dwindled to virtually nothing under a succession of corrupt governments and while this has received a huge new boost under the current Kabila government there is no telling whether this volatile nation will descend into anarchy again. Hopefully not, but recent developments like the treatment of First Quantum, which has spent major capital sums on its DRC developments, still suggests some major underlying governance problems.
Growth in global copper requirements is almost assured though as it is very much an ‘infrastructure' dependent metal and growth aspirations of countries like China, India and the BRIC economies - and virtually all developing nations - where aspirations for Western-type wealth and consumerism is forcing unprecedented levels of global growth. This too will impact other metals and minerals, but few quite so heavily as copper. The future for the red metal looks strong - but will we be able, as Friedland suggested, to supply the world's requirements over the next 20 years.
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