Copper Climbs as Supply Concerns Mount
February 13 2017 - 6:36AM
Dow Jones News
By Katherine Dunn
LONDON--Copper prices edged to a fresh 20-month high on Monday,
as a strike at the world's largest copper mine and the threat of
supply disruptions at an Indonesia mine stoked supply worries.
The three-month London Metal Exchange contract rose 0.10% to
$6,097 per metric ton in midmorning trade, its highest point since
late May 2015.
"In the near term, copper prices should continue to trade on
headlines from Escondida as well as from the large Grasberg mine in
Indonesia, which is also at risk of production disruptions if an
export permit is not granted by the government in the coming
weeks," J.P. Morgan said in a morning note.
The supply concerns were outweighing a slightly stronger dollar
as gains across the metals sector led rises in markets in Australia
and Europe. The WSJ Dollar Index was up 0.09% on Monday.
Last week, talks between management and workers at the Escondida
mine in the Atacama Desert of northern Chile broke down, and
workers have been striking since Thursday. On Friday, BHP Billiton
Ltd., the majority-owner of the mine, said it would not be able to
fulfill contracts for copper deliveries or shipments as a result of
the strike, according to a spokesman.
Traders are also closely watching for news at Freeport-McMoRan
Inc.'s Grasberg mine in Indonesia. The company has said that it
will make cuts to output if it doesn't receive an export license
from the government by midmonth.
On Friday, prices briefly dipped on reports that the government
had offered Freeport a special export license, before rallying
after the company said there was still no agreement.
"The labor disputes in Indonesia and [Latin America] are no
closer to a resolution with both sides seemingly resigned to a
potentially prolonged period of disruption, whilst this state
persists every fresh high will likely bring fresh money in," Matt
France, an analyst at Marex Spectron, said in a morning note.
Analysts estimate the two mines combined produce around 10% of
the world's copper supply.
But if the export disagreement is resolved, that could pave the
way for exports of copper concentrate to be resumed, Commerzbank
said. Those exports have been paused since Jan. 12.
The gains appear to be largely speculative, the German lender
said. But other analysts think the market still has further to
climb.
"We think markets have yet to price in longer-than-expected
supply shocks and better-than-expected economic fundamentals in
China," Argonaut Securities said in a report. China is the world's
top consumer of the metal.
The other base metals were mostly higher on Monday. Lead was up
1.71% at $2,443 a metric ton, zinc was up 0.89% at $2,952 per ton,
nickel was up 0.89% at $10,745 per ton and tin was up 1.75% at
$19,756 per ton. Aluminum was down 0.13% at $1,873.50 a metric
ton.
Riva Gold and Biman Mukherji contributed to this article.
Write to Katherine Dunn at Katherine.Dunn@wsj.com
(END) Dow Jones Newswires
February 13, 2017 06:21 ET (11:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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