Copper Investing News

By Leia Michele Toovey- Exclusive to Copper Investing News

Wednesday was the first day in five sessions that U.S. copper futures ended up.

The change in trend comes after a reduced production outlook from a top producer and an earthquake in northern Chile re-ignited some fears of a shortfall in supply. The price of copper has declined recently, as the rebound of the US dollar vs. the euro has been weighing down both, precious metals as well as oil.

Gold has been especially hard-hit, falling to its lowest level in the past 11 months. Copper for delivery in three months on the London Metal Exchange was at US$6,865/6,866 per tonne in trade, up slightly from US$6,840 per tonne on Wednesday when it touched an eight-month low of US$6,775 per tonne. Copper for December delivery settled up 2.70 cents at US$3.1140 a lb on the New York Mercantile Exchange’s COMEX division. The session range widened to US$3.1440 to $3.04, the contract’s lowest level since January 23. Spot September HGU8 gained 2.85 cents to close at US$3.1235.

COMEX estimated final futures volumes were at 19,210 lots, compared with Tuesday’s official count at 16,003 lots. Indian copper futures reversed earlier losses on Thursday as supply threats supported the metal despite the strong dollar tempting investors to sell commodities. At 6.08 p.m., the benchmark November copper MCCX8 on the Multi Commodity Exchange of India was up 0.35 per cent at Rs 314.2 per kg.

Mining major revises production estimates

Freeport-McMoRan Copper Gold Inc (NYSE.FCX) slashed its production outlook due to an incident at its Grasberg mine in Indonesia, but failed to divulge any details about what had actually happened there.

At the same time; McMoRan also announced that it was expecting Q3 income to fall short by approximately US$100 million on the back of recent lower copper prices. At the start of the third quarter, copper was selling for above US$4 per pound, but since July, the benchmark December copper contract has been on a steady decline. Where it sits now, copper has lost nearly 25 per cent of its value and is teetering near a 7-1/2-month low. In late morning trading on the New York Stock Exchange, Freeport’s stock was up 3.4 percent at US$67.37.

Earthquake raises concern

An earthquake in the mining districts in northern Chile on Wednesday also raised concerns, although no damage was reported. The 5.8-magnitude on the Richter scale earthquake struck northern Chile on Wednesday. The U.S. Geological Survey said the quake hit 100 km east of Iquique in Chile’s far north, near the country’s large copper mining areas. Chile is the world’s leading copper producer.

Fortunately, officials from the two largest mines in the area, Chile’s Collahuasi copper mine, owned by Xstrata Copper (XTA.L) and Anglo American (AAL.L), reported that neither of the mines suffered significant damages.

Largest copper field in Russia to be developed

Iron and steel maker Metalloinvest has won a bid to develop Udokan, one of the world’s largest copper fields. Without explanation, the bidding for Russia’s biggest copper field was concluded a week earlier than planned with Metalloinvest issuing the winning bid of US$585 million. Metalloinvest, half-owned by billionaire Calisher Usmanov, has recently teamed up with state conglomerate Russian Technologies, who will assist in the development of the property. The other bidder in the auction was a consortium of state-owned Russian Railways and Russia’s second-largest copper producer, Urals Mining and Metals Co. Three other bidders - Norilsk Nickel, Oleg Deripaska’s Basic Element and Mikhail Prokhorov’s Onexim Group - pulled out.

Analysts say Metalloinvest is likely to create a joint venture with other, more experienced base metals companies. Speculation is that some of those who withdrew their bids may be invited to help develop the project; with Norilsk Nickel the likeliest partner. There was a preliminary agreement between Norilsk and Metalloinvest, at that is the reason Norilsk excused itself from bidding. Although the copper field is the biggest in Russia, it may not prove to be as lucrative as anticipated. The remote area requires a great deal of capital investment, at a time where the price of copper is volatile.