Copper market developments in August

LONDON: Copper prices lost more than five percent in August and global economic worries will tend to weigh on the market near term, although persistent supply worries may help limit declines.

"I think the turmoil is here to stay, with prices tending to move on macro news," said Virtual Metals analyst Carl Firman.

"Short term I see downside risk, with slowdown in the US economy and further problems in Europe, but it'll be quite volatile," he added.

Fastmarkets analyst Will Adams also anticipated further weakness in a deteriorating economic environment.

A break below $8,500-8,400 in that instance could trigger further sharp losses of up to $1,000 a tonne.

The London Metal Exchange (LME) three-months copper price was last indicated at $8,922.25 a tonne.

Standard Chartered analyst Dan Smith said he expected base metals in general to remain under pressure.

Even so, he saw copper drawing some support from poor supply figures and positive signs for demand in China and Japan, which account for around 45 percent of total consumption.

"I think copper is going to trade pretty much sideways in the next few months," said Standard Chartered analyst Dan Smith.

The copper market reeled in August after news that output in top producer Chile recorded an 18.0 percent year-on-year decline in July.

Below are some of the more significant recent developments in production, stocks and prices that may continue to influence the direction of the market in 2011.

Aug 31 Canada's Nautilus Minerals said it plans to issue shares to raise about $100 million to fund the development of its flagship copper project, off the coast of Papua New Guinea in the Pacific Ocean.

Aug 31 Chile's giant Collahuasi copper mine expects to produce around 500,000 tonnes of copper this year, with output stabilising around 600,000 tonnes in coming years as it seeks to implement an expansion plan, the operator's chief executive said.

Aug 30 Copper output in Chile, the world's No. 1 producer, totalled 373,498 tonnes in July, down 18 percent from the same month last year, government statistics agency INE said. The July copper output figure was substantially below June copper output of 426,477 tonnes, reported by the INE last month.

Aug 25 Zambia, Africa's top copper producer, has asked mining companies to reduce their usage of electricity following a fault on a power line through which the country imports power.

Aug 24

The world refined copper market saw a deficit of 146,000 tonnes in January to May, compared with a deficit of 162,000 tonnes in the same period last year, the International Copper Study Group (ICSG) said in its latest monthly bulletin.

Aug 18 Congo's government has sold its minority stake in two confiscated copper mining projects for $30 million, and the state mining company involved has paid millions to fund upcoming elections, according to a senior lawmaker and documents.

Aug 17

The labour union at Chile's Collahuasi mine threatened to stage a one-day stoppage on Sept. 2 if the mine's operator did not hire back workers fired after a previous disruption. On Sept. 2, a union source said workers had decided not to stage the stoppage.

Aug 15 Copper output in Zambia decreased to 472,891 tonnes in January-July 2011, compared with 478,734 tonnes in the same period a year earlier, the central bank said.

Aug 12 Anvil Mining Ltd said it has completed construction of a new plant at its Kinsevere copper mine in the Democratic Republic of Congo and commercial production from the facility is set to begin in the current quarter. With the commissioning of the new plant, Anvil expects to more than triple its annual copper production to about 60,000 tonnes of copper cathode.

Aug 10 China produced 3,123,000 tonnes of refined copper in the first seven months of the year, up 14.6 percent from the same period last year, according to the National Bureau of Statistics. Output of mined copper rose by 16.4 percent over the same period to reach 740,000 tonnes.

Aug 5 Chile's state copper giant Codelco said it had approved a pre-feasibility study to expand its Radomiro Tomic division, in which it could invest as much as $2 billion. The division produces around 300,000 tonnes of fine copper per year

Aug 3 Ivanhoe Mines said its Oyu Tolgoi mine is on track to start producing in 2013.

The construction budget at the Mongolian project, operated by Rio Tinto, for 2011 is $2.3 billion, an official said.

Aug 2 Southern Copper thinks its troubled $1 billion Tia Maria copper mine in southern Peru will be approved by the end of this year and could be producing in the first half of 2013, its chief executive said.

Copper prices ended August at $9,275 a tonne, down from $9,830 a month earlier to record its worst monthly loss since June 2010.

On Aug. 1, three-months reached $9,905, its highest since April.

But the market soon succumbed to sharp downward pressure as worries grew over a spreading debt crisis and slowing economic growth.

By Aug. 9, copper had fallen to an eight-month low of $8,446.25. Fears over the global economic outlook receded for a time and consumer buying emerged at these lower levels, helping prices to steady.

The psychologically significant $9,000 a tonne level was regained on Aug. 25. Copper made further headway through to the end of the month, helped by concerns about tightening supply.

The upbeat mood did not last long and copper has struggled to hold above $9,000, buffeted by deepening concern over the state of the global economy.

In July, the twice-yearly Reuters base metals price poll put the median average for copper cash prices at $9,570 a tonne for 2011 and at $9,995 for 2012.

A January poll showed copper cash prices were expected to average $9,663 a tonne this year compared with $7,543 last year.

LME copper stocks ended August at 464,625 tonnes, little changed from 466,025 tonnes the previous month.

Inventories ticked lower in the early part of the month and were at 460,600 tonnes on Aug. 12, their lowest since late April.

The downtrend halted there, however and movements were fairly mixed after that.

Total exchange stocks at the end of August were around 644,000 tonnes, down from about 658,000 the previous month. They amounted to 12 days of consumption.

Copyright Reuters, 2011