The Swedish firm, mainly focused on copper and zinc, said the expansion of its Aitik mine had helped boost copper production by more than half in the period but borrowing costs had risen as a result of the expansion. It had also suffered higher costs due to the temporary shutdown of a smelter in May.

“The maintenance shutdown at Ronnskar is largely responsible for the deterioration in operating profit in comparison with the first quarter,” the company said in a statement, referring to the performance of its smelting business.

Boliden said output at its Aitik mine would reach full capacity of 36 million tonnes of ore a year by 2014, but said it had incurred higher interest costs on its investment.

Analysts said this and the smelter shutdown were weighing on Boliden shares.

“Estimates will be lowered partly because of … Aitik and partly because costs have been higher than expected,” said Fredrik Agardh, an analyst at Handelsbanken Capital Markets.

Boliden’s shares, down over 10 percent in the past month, dropped a further 4 percent on Monday to 83 crowns from 86 before the results were released.

Chief Executive Lennart Evrell said increased production volumes, the new Aitik facilities and the maintenance shutdown had increased costs by 503 million crowns compared with the same period last year.

METALS VOLATILE

Zinc prices have dropped sharply this year, with three-month zinc down 30 percent at the end of the second quarter from the end of 2009, partly due to excess production and stock. The outlook for copper prices is also uncertain. [ID:nLDE66415K] [ID:nLDE6661FD]

Boliden said its zinc output was unchanged from the first quarter, while copper production had risen 51 percent.

“There is uncertainty regarding metal prices — no positive trigger in that area — so I expect quite a few downward revisions of estimates based on this report,” said an analyst who asked not to be named.

Operating profit at the firm came in at 1.12 billion crowns ($153 million), slightly below the average forecast for 1.3 billion crowns given in a Reuters poll of 10 analysts. Quarterly revenue came in at 8.9 billion crowns, which compared with an average forecast of 9.2 billion forecast.

Stockpiles tracked by the London Metal Exchange fell for a 12th day today and have slid for 33 of the past 34 sessions. Bookings to remove copper from LME warehouses increased to the highest level in almost four months on July 1.

“Prices are creeping higher after the strong losses last week,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone.

Copper for delivery in three months climbed $90, or 1.4 percent, to $6,500 a metric ton at 5:14 p.m. on the LME. The contract lost 5.3 percent last week. Futures for September delivery gained 0.7 percent to $2.9365 a pound on the Comex in New York.

Weinberg predicted “thin trading,” citing the U.S. Independence Day holiday. Comex floor trading is shut today. Investors bought and sold 4,660 three-month copper contracts in London, less than 15 percent of the total for July 2, last week’s slowest day of trading by volume.

LME prices last week dropped the most since the week ended June 4 as figures showed slower growth in manufacturing in China, the world’s top copper consumer. Auto sales in the country weakened in June and a services-industry index slid to a 15-month low, adding to signs that the economy leading the world recovery is cooling, reports showed today.

Car Sales

Passenger-car purchases rose 10.9 percent from a year earlier, down from May’s 25 percent gain, the China Automotive Technology & Research Center said. The services-industry measure fell to 55.6 from 56.4, HSBC Holdings Plc and Markit Economics said in an e-mailed statement.

“The government-orchestrated slowdown in China” contributed to Citigroup Inc.’s decision to cut its forecast for copper prices in this year’s second half, analyst Alan Heap in Sydney wrote in a report today. He also cited “prospects of a stalled recovery in the developed economies (Europe in particular).”

Copper will average $3.10 a pound ($6,834 a ton) in the half, 15 percent below its prior estimate, Citigroup said. The metal will average $3.29 next year, 9 percent less than predicted previously, according to the report.

Slowing Momentum

Concern about tighter monetary policy in China and the potential impact on demand of Europe’s fiscal crisis have helped to pull LME copper down 12 percent this year. Growth in Europe’s services and manufacturing industries slowed in June, Markit said, adding to signs a recovery is losing momentum.

The chance that Europe’s economy may return to recession “is rising fast and is at its highest since the recovery started more than a year ago,” Nick Moore, head of commodity strategy at Royal Bank of Scotland Group Plc, said in a report e-mailed today. “Absent an effective policy intervention to tackle the debt crisis in the periphery over the coming months, the European economy will double-dip in 2011.”

A composite index based on a survey of euro-area purchasing managers in both services and manufacturing fell to 56 from 56.4 in May, Markit said. An index of services retreated to 55.5 from 56.2. A gauge of euro-area manufacturing declined to 55.6 from 55.8 in the previous month, Markit said on July 1.

LME copper stockpiles fell to 444,500 tons, the lowest level since Dec. 2. Canceled warrants, as the bookings are known, slid 4.8 percent to 33,325 tons, the second drop in a row.

Nickel for three-month delivery on the LME slipped 0.3 percent to $18,744 a ton, erasing a gain of as much as 2.3 percent. Vale SA reached a “tentative” agreement for a new contract with workers in Canada who have been on strike for a year, the longest labor dispute in Vale’s 67-year history.

Aluminum was little changed at $1,937 a ton and lead rose 0.4 percent to $1,760 a ton. Zinc climbed 1.6 percent to $1,808 a ton and tin rose 0.4 percent to $17,300 a ton.

Copper output at 321 132 t from January to May was higher than the 276 230 t the southern African country produced during the same period last year.

The central bank said in a fortnight report that copper exports increased marginally to 345 329 t in the first five months of 2010 versus 244 873 t in 2009.

Cobalt production increased to 3 210 t in 2010 from 1 613 last year and exports shot up to 3 198 t to May this year from 1 587 t in 2009, the Bank of Zambia said.

Chibamba Kanyama, an economist at the country’s main think-tank, the Economics Association of Zambia, told Reuters copper output had risen following the opening of new mines like Equinox Minerals’ Lumwana mine and the increase in copper prices

“It was not cost efficient to carry out mining activities in certain parts of the mines when the price of copper was low but with the rise in prices it is now profitable to carry out mining in areas that were considered expensive,” Kanyama said.

Kanyama said Zambia was likely to achieve its target to raise copper production to about one-million tons by 2011, from just below 700 000 t in 2009.

“Copper prices are cyclical and the mining companies are rallying behind the high price to maximize output before the cycle goes down,” Kanyama said.

Kanyama said cobalt output had almost doubled following the re-opening of Zambia’s largest cobalt producer, Chambishi Metals.

Copper mining is Zambia’s economic lifeblood and the mines are a major employer in the country of over 12-million people.

Foreign mining companies in Zambia include London-listed Vedanta Resources, Canada’s First Quantum Minerals, Glencore International of Switzerland and Metorex of South Africa.

Fluor said on Tuesday it would handle the engineering and construction on the new Caserones copper mine for Minera Lumina Copper Chile, which is backed by Pan Pacific Copper Co Ltd and Mitsui & Co Ltd.

“South America, and Chile in particular, continues to be a robust market for our company in the mining sector,” Dwayne Wilson, Fluor’s group president for industrial business, said in a statement.

The $1,3-billion will be added to Fluor’s backlog for the second quarter, which it said last month could top $30-billion after falling to $25,7-billion at the end of the first quarter, as new awards could exceed its single-quarter record of $8,8-billion.

Fluor has said that the profitability of this bigger backlog would be relatively weaker because mining work tends to yield a lower margin than oil and gas projects.

Work on the Caserones projects will be done at 4 000 m above sea level, and the project has a marketable output of 3,6-million tons of fine copper and 87 kilotons of molybdenum, Fluor said.

When Minera Lumina signed off on the plans in February, with copper prices having more than doubled from a year before, the project was due to be completed by 2013, according to a statement on Mitsui’s website.

Pan Pacific is 66 percent owned by Nippon Mining & Metals, part of Nippon Mining Holdings Inc, while the remainder is held by Mitsui Mining and Smelting Co Ltd.

Shares of Irving, Texas-based Fluor were down 3% on Tuesday, in line with the sector as crude oil prices tumbled.

 FUNDAMENTALS

 * Three-month copper on the London Metal Exchange CMCU3
rose $4 to $6,450 by 0132 GMT on Friday, hovering above a
one-week low of $6,410 in the previous session.

 * Shanghai's benchmark third-month copper futures contract
SCFc3 slipped 0.6 percent to 51,340 yuan a tonne.

 * New U.S. claims for jobless aid rose last week while
consumer prices notched their largest decline in nearly 1-½
years in May, suggesting interest rates will remain ultra low
to nurse the fragile economic recovery. [ID:nN17254724]

 * Meanwhile factory activity growth plummeted in the U.S.
Mid-Atlantic region in June, a survey by the Philadelphia
Federal Reserve Bank showed, adding to worries about the
vulnerable recovery in the U.S. economy. [ID:nN17165505]

 * LME copper stocks rose 1,025 tonnes to 460,175 tonnes on
Thursday, the first rise since mid-May. [MCU-STOCKS]

 MARKET NEWS

 * The euro held steady near three-week highs on Friday, as
investors liquidated short positions after a robust response to
Spanish bond auctions, while the U.S. dollar appeared
vulnerable to a sell-off.[USD/]

 * U.S. stocks edged higher late in a choppy, thinly traded
session on Thursday as investors built on momentum gained after
the S&P 500 index broke through its 200-day moving average
earlier this week. [.N]

 DATA/EVENTS

 The following data/events is expected on Friday:

 * India M3 Money Supply June  (1130 GMT)

 * U.S. ECRI weekly index     (1430 GMT)

 PRICES
 Base metals prices at 0132 GMT
 Metal         Last       Change   Pct Move  End 2009 YTD pct
chg
 LME Cu        6450.00      4.00     +0.06    7375.00
-12.54
 SHFE Cu*     51340.00   -330.00     -0.64   59900.00
-14.29
 LME Alum      1958.00     -8.00     -0.41    2230.00
-12.20
 SHFE Alum*   14520.00    -60.00     -0.41   17160.00
-15.38
 COMEX Cu**     290.25     -9.15     -3.06     332.75
-12.77
 LME Zinc      1742.00    -23.00     -1.30    2560.00
-31.95
 SHFE Zinc    14125.00   -170.00     -1.19   21195.00
-33.36
 LME Nickel   19500.00   -300.00     -1.52   18525.00
5.26
 LME Lead      1742.00    -22.00     -1.25    2432.00
-28.37
 LME/Shanghai arb^           189
 Dollar/yuan          6.8282 \ 6.8289
 ** 1st contract month for COMEX copper
  * 3rd contact month for SHFE aluminium, copper and zinc
  ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
third month

OZ Minerals has a $A1bn acquisitions war chest, and it will target copper projects of between 50,000 and 150,000 tonnes per annum. CEO Terry Burgess says the uncertainty created by the proposed tax on mining profits will make it more difficult for the group to expand its Prominent Hill Mine in South Australia. He also concedes that OZ itself could become a takeover target due to the impact that the downturn in copper prices has had on asset values.

China’s copper imports at around 397 000 tons were slightly below forecasts, but analysts had expected a drop from April’s 436 345 tons as measures to cool growth rates and slow property speculation took hold.

Copper for three-months delivery on the London Metal Exchange was $6 425 a ton at 1415 GMT, versus $6 340 a ton on Wednesday and after hitting a session high of $6 455, its highest since Friday.

“Chinese imports are notoriously variable, it does not surprise me that they’ve pulled back a bit ahead of summer shut-downs,” he said, adding that Chinese demand would remain supportive in the longer term.

“They have cut back on speculative activity in property,” he added. “But I see China touching the breaks rather than throwing out the anchors.”

“It is still a healthy number and is reflective of the still strong underlying demand if you consider there’s destocking going on in China,” said analyst Gayle Berry at Barclays Capital.

Risk appetite across global markets looked strong, with the euro <EUR=> rising 1 percent versus the dollar. The euro was supported in part by the head of China’s national pension fund saying the currency would weather Europe’s debt crisis.

The European Central Bank kept interest rates at 1.0 percent as expected on Thursday after a torrid month in which it has abandoned resistance to buying government debt and flung its exit strategy into reverse.

A global shares rally also supported sentiment.

RATE DECISIONS

Chinese demand was the major reason copper prices more than doubled last year. The metal, used extensively in construction and wiring, has given up gains after hitting a 20-month high above $8,000 a ton in mid-April as China slowdown fears and worries euro zone economy weighed.

On the fundamentals front, which analysts say is largely being ignored by the market for the moment, inventories for copper at LME registered warehouses dropped by 1 775 tons and 7 575 tons for aluminium.

Battery material lead was at $1 696,25 a ton versus Wednesday’s $1 680 a ton while tin was at $16 700 a ton from $16 300. Aluminium was $1 964 a ton from $1 927 and nickel eased to $19 538 from $19 270.

LME zinc was at $1 770 from $1 757. Zinc, the weakest performer amongst LME metals has lost one third of its value this year, under pressure from high stocks and worries about longer term surpluses.

The deficit will be between 500,000 metric tons and 1 million tons this year, Targhetta said in an interview at the Copper 2010 conference in Hamburg yesterday.

“The concentrate market will remain tight over the next three years, or even longer,” said Targhetta, who is also president of Freeport unit Atlantic Copper. Concentrate is the raw material from which copper is produced.

Mining companies delayed or scrapped new projects after copper prices plunged a record 54 percent in London in 2008, crimping future supply. Global mine production fell 0.1 percent last year, Barclays Capital said in a report. The refined market is expected to show a deficit of 155,000 tons this year after a surplus of 567,000 tons in 2009, according to the May 21 report.

The shortfall in mined output will keep the fees that mining companies pay smelters to turn ore into metal “under pressure for a long time,” Targhetta said at the event, organized by the GDMB Society for Mining, Metallurgy, Resource and Environmental Technology with Hamburg-based Aurubis AG. The German company is the world’s largest publicly traded copper refiner.

Smelters have received increased supplies of scrap copper, and have benefited from higher prices for sulfuric acid, the largest by-product from the smelting process, Targhetta said.

‘Scrap is Helping’

“Scrap is helping smelters in China and also outside China,” Targhetta said. This year Atlantic Copper’s plant in Huelva, Spain, will produce 20,000 tons of copper from scrap, up from 7,000 tons last year, he said.

Atlantic Copper, based in Madrid, produces about 1 million tons of sulfuric acid per year. This year the company expects to produce 278,000 tons of copper anodes, usually refined into a finished form of metal known as cathode, Targhetta said. That’s 8,000 tons more than last year, he said. Production of cathodes will reach 262,000 tons this year, up from 257,000 tons, he said.

“Production will be lower next year” as the plant is scheduled to be closed for about 20 days for maintenance work, he added.

“The Eurozone is a problem, it might have economic repercussions but for the moment there are still signs of recovery,” said BaseMetals.com analyst William Adams.

Investors were waiting for an EU summit on Thursday and Friday for any signs of aid for Athens, after efforts to arrange a special euro zone meeting failed.

Also of concern, Fitch Ratings cut Portugal’s sovereign credit rating by one notch to AA- on Wednesday, fuelling euro zone debt worries and boosting the dollar.

A stronger dollar makes dollar-priced metals costlier for non-U.S. investors.

Investors are awaiting weekly U.S jobless data due later this session for further clues over whether the economic recovery in the US is sustainable.

They were also cautious ahead of a hearing by a US market regulator to discuss possible limits on metal futures trading.

Mine production has been halted in the copper-rich nation as Chile copes with a wave of aftershocks, reports Alix Steel for The Street. What it means in the long term is up in the air; can Chile get its mines up and running again quickly? Or are the temblors signs of more trouble to come for the nation? Chile accounts for one-third of global mine production, so any lingering troubles could have a noticeable global impact.

Analysts say that while the copper mine interruption is certainly a disruption to the copper supply, the larger impact will come from disruption of deliveries from the mines, and from the disruption of power supplies to the mines.

Although most of Chile’s production comes from the North, and the quake hit the Central part of the country, the damage to the highways will suspend business as usual, because of the lack of access for transporting fuel and other supplies to mines, explains Reuters on Zambia.
iShares MSCI Chile Index (ECH: 55.93 0.00 0.00%)

iPath Dow Jones UBS Copper Tr Sub-Index ETN (JJC: 45.49 0.00 0.00%)

The metal hit a five-week high at $7 600 (R58 520) a tonne in Asian trade.

The 8.8-magnitude quake which hit the South American nation early on Saturday and ensuing tsunamis killed more than 700 people in Chile and dealt a heavy blow to one of Latin America’s most stable economies.

Chile’s biggest copper mines slowly resumed operations on Sunday despite limited power supplies, which analysts say could hamper exports.

“The impact on copper production appears to be limited for now, but should not be insignificant in a copper market that continues to see a chronic underperforming supply-side,” said Standard Bank in a note.

The jump in copper prices to their highest in five weeks after the quake has likely tipped technical signals back into bullish mood, traders said.

PRICES

* Three-month copper on the London Metal Exchange was trading at $7 440 a tonne at 10:13 SA time compared with $7 195 at the close on Friday.

* Aluminium was at $2 148 a tonne from $2 133.

DATA/EVENTS

* US personal income/spending for January, 15:30 SA time.

* US institute of supply management February manufacturing index, 17:00 SA time.

* US January construction spending, 17:00 SA time.

MARKET NEWS

* The dollar index edged up 0.1 percent, supported at the margins by improving US economic data, while sterling fell to a nine-month low against the dollar and a one-year low on the yen on Monday, hurt by political uncertainty.

* Oil rose more than 1 percent and topped $80 a barrel on Monday, amid threats by Iran that it could cut off energy supplies to Europe, although prices later eased on worries about slowing demand in China.

* Asian equities were firm and European shares were higher in early trade as signs emerged that Greece’s debt crisis could be easing, while firmer copper prices after a massive earthquake in Chile boosted mining shares.

FUNDAMENTALS

* Up to one-fifth of Chile’s copper mine capacity was shut after the world’s biggest producer was hit by a powerful earthquake on Saturday, but at least two mines in the quake-affected area resumed operations within 48 hours.

* Chile’s biggest copper mines hit by a massive earthquake slowly resumed operations on Sunday despite limited power supplies, which analysts fear could curtail exports from the world’s No. 1 producer.

* Chinese copper mining stocks rallied on Monday as copper prices hit five-week highs on supply worries after a massive earthquake hit top producer Chile.

* Key zinc mining and smelter firms have agreed to processing fees of around $270 a tonne, up almost 40 percent on last year, industry sources said on the eve of the International Zinc Association (IZA) conference.

* Global miner Rio Tinto will increase its stake in Canada’s Ivanhoe Mines by 2.7 percent to 22.4 percent for $233 million, in a move tied to plans to jointly develop the giant Oyu Tolgoi copper mine in Mongolia.

TECHNICALS

* Copper support at $6 970, resistance at $7 240, 14-day RSI at 64.5.

* Aluminium support at $2 070, resistance at $2 142, 14-day RSI at 56.7

* Oil prices rebounded above $78 a barrel on Friday after sliding more than 2 percent the day before, lifted by a weaker dollar, but worries over the U.S. economy weighed on the market.

* US stocks recovered most of their losses but ended lower on Thursday after weak employment and durable goods data added to recent worries about the strength of the economic recovery.

* Asian stocks rose on Friday as investors tried to shake off weak economic data in the United States and Europe, but lingering caution about riskier assets supported the safe-haven yen.

FUNDAMENTALS

* Japanese shipments of aluminium products rose 23.1 percent in January from a year earlier, industry data showed on Friday, underpinned by a recovery in demand in the auto, electrical appliances and food sectors.

* Japan’s refined zinc exports for January fell 0.7 percent from a year earlier to 6 526 tonnes, with Taiwan accounting for the largest share, at 25 percent, Ministry of Finance data showed on Friday.

* Japan’s refined copper exports fell 19.6 percent in January from a year earlier to 47 936 tonnes, with China the destination for more than half the volume, Ministry of Finance data showed on Friday.

* Europe’s No.2 copper producer KGHM said 2009 net profit fell 14 percent to 2.5 billion zlotys ($843 million), in line with guidance upgraded last week as a rebound in copper prices capped KGHM’s profit decline.

* Deliverable copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 28 percent from two weeks earlier, while deliverable aluminium inventories rose 3 percent, the exchange said on Friday.

TECHNICALS

* Copper support was at $6 970 a tonne and resistance at $7 248. The 14-day RSI was at 52.5

* Aluminium support was at $2 070 a tonne and resistance at $2 106. The 14-day RSI was at 45.1

Trade was cautious, however, ahead of a slew of US data including fourth-quarter gross domestic product, consumer sentiment for February and existing home sales for January.

“We have been seeing good CTA buying in the last few days. Essentially metals are still an investment product, we still see a lot of money coming in. Sentiment is still ‘buy the dips’,” said a London-based trader.

Capping gains, Shanghai copper stocks soared 28 percent from before the week-long holiday to 149 478 tonnes, the highest since late September 2002, data showed.

Copper prices on the London Metal Exchange fell about 2 percent in the previous session on a strong dollar and disappointing US jobless claims and durable goods orders data.

PRICES

* Three-month copper on the London Metal Exchange was trading at $7 100 (R55 096) a tonne at 10:32 SA time compared with $6 999 at the close on Thursday.

* Aluminium was at $2 100 a tonne from $2 086.

DATA/EVENTS

12:00 SA time – Euro Zone final HICP, Jan

12:00 SA time – Italy PPI, Jan

12:00 SA time – Japan Forex intervention data for February

N/A – Germany preliminary HICP, Feb

15:30 SA time – US preliminary Q4 GDP Economists in a Reuters survey forecast a 5.7 percent annualized pace of growth, a repeat of the advance Q4 estimate.

15:30 SA time – ISM NY NAPM for February

16:45 SA time – US Chicago ISM for February, Economists in a Reuters survey forecast a reading of 60.0 compared with 61.5 in January.

16:55 SA time – Reuters/Univ of Mich final February consumer sentiment Economists in a Reuters survey expect a reading of 74.0 compared with 74.4 in the final January report.

17:00 SA time – US Existing home sales for January

MARKET NEWS

* The yen dipped on Friday but held on to the bulk of its gains from the day before, as doubts about the pace of a global economic recovery and persistent worries about sovereign debt problems in Greece kept investors away from riskier currencies.

The Conference Board’s gauge of consumer sentiment declined to 46 in February, the business-backed group said. That’s beneath the lowest forecast in a Bloomberg News survey of 68 economists. Copper dropped 8.8 percent last month on concern that a slowing economic rebound will curb demand for the metal used in pipes and wires.

“This bad consumer-confidence report is a great excuse for people to take their money off the table and wait to see how things shake out,” said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. “It’s definitely causing concern.”

Copper futures for May delivery sank 9.4 cents, or 2.8 percent, to $3.2345 a pound on the New York Mercantile Exchange’s Comex unit. That marks the biggest decline for a most-active contract since Feb. 4.

Rio Tinto Group, the world’s third-largest mining company, said the removal of government stimulus packages and slowing consumer spending may dent demand for metals in the second half of the year.

“There are plenty of negative forces out there,” Vivek Tulpule, the chief economist for London-based Rio, said in an interview.

Copper prices also dropped as the dollar gained, reducing demand for commodities as alternative assets. The U.S. Dollar Index, a six-currency measure of the greenback’s strength, rose as much as 0.6 percent.

On the London Metal Exchange, copper for three-month delivery fell 2.7 percent to $7,132 a metric ton ($3.24 a pound). Aluminum, nickel, tin, lead and zinc prices also declined.

* Peso jumps 1 percent following the data

SANTIAGO, Feb 15 (Reuters) – Chile’s copper export revenues CLCOPX=ECI more than doubled in January to $3.373 billion, the central bank said on Monday, lifted by a recovery in copper prices and boosting the local peso.

The value of Chile’s copper exports totaled $1.598 billion in January 2009.

Last month, the central bank reported copper exports came to $3.174 billion in December. Chile is the world’s top copper producer, mining about a third of global supply.

Chile’s peso CLP=CL rose 1 in early Monday trade to 522.70/523.20 per dollar compared with Friday’s close of 528.00/528.50, on the back of the data, which adds to evidence that the economy is recovering from its first recession in a decade, a recession that was triggered by global financial crisis.

Copper revenues fell last year after a sharp drop in copper prices due to global crisis, which dented the South American country’s revenue intake.

But a steep recovery in prices in recent months has lifted copper export income, traditionally Chile’s main export earner.

The government said last month that output of the red metal rose 0.8 percent from the previous year to 5.4 million tonnes in 2009.

Chile’s copper output rose 3.8 percent in December [CLCOPP=ECI] from the same month the previous year, according to government data. Output data for January are due out Feb. 26.

With much of Asia shut for the Lunar New Year, and a market holiday in the United States, just 172 lots of copper changed hands by 0735 GMT, versus more than 2,000 lots typical for the time of day and well below recent elevated levels of 3,000 lots or more. “There is not much to report today. With China out there is very little business. We saw prices jobbing a little higher on the Japanese economic numbers, but it didn’t last,” a trader Sydney said.

“We are a touch down now but I don’t think we’ll see much action today.” Prices fell $7.25 to $6,802.75 a tonne, off an earlier low of $6,787. Copper traded as high as $6,860 earlier.

Japan’s economy expanded at the fastest pace in two quarters, and more than expected, in October-December as an export recovery spurred capital spending. Copper prices fell 1.9 percent on Friday after China surprised markets by hiking the percentage of cash banks must keep as reserves, which reduces funds available for lending.

The increase, coming in the wake of benign inflation data, and ongoing doubts about debt levels in Greece, put pay to an attempt to see copper break above $7,000 last week. LME aluminium rose $5 to $2,060. Nickel rose $50 to $18,600, while lead the biggest loser, dropped $18 or 0.8 percent to $2,115.

With much of Asia shut for the Lunar New Year, and a market holiday in the United States, just 67 lots of copper traded hands by 0425 GMT. Prices rose $11 to $6,821, the low of the day, having earlier touched $6,860.

LME aluminum was flat at $2,055. The only other metal to trade, nickel, rose $55 to $18,605.

Copper prices fell 1.9 percent on Friday after China surprised markets by hiking the percentage of cash banks must keep as reserves, which reduces funds available for lending.

The increase, coming in the wake of benign inflation data, and ongoing doubts about debt levels in Greece, put pay to an attempt to see copper break above $7,000 last week.

PRICES
* Three-month copper MCU3 on the London Metal Exchange was
trading at $6,891.25 a tonne at 0812 GMT compared with $6,940 at
the close on Thursday.
* Aluminium MAL3 was flat at $2,065 a tonne.

DATA/EVENTS
* U.S. Commerce Dept releases Jan retail sales, 1330 GMT.
* Reuters/University of Michigan Surveys of Consumers
releases preliminary U.S. Feb consumer sentiment index, 1455 GMT.
* U.S. Commerce Dept issues December business inventories,
due at 1500 GMT.
* U.S. Economic Cycle Research Institute (ECRI) releases
weekly index of economic activity for week to Feb 5 at 1530 GMT.
* Euro zone flash GDP estimates, 1000 GMT.
* Euro zone industrial production data, 1000 GMT.
[ECI/US] [ECI/EURO] [ECI/GB]
[M/DIARY] [MTL/DIARY]

MARKET NEWS
* The dollar strengthened against the euro as the single
currency softened across the board, weighed by disappointment
among investors over lack of detail from the European Union on
helping debt-laden Greece. [FRX/]
* Oil eased to just above $75 a barrel, pressured by a
firmer U.S. dollar as investors awaited further details of the
European Union plan to help Greece. [O/R]
* Asian shares rose on Friday as investors took comfort from
the EU’s pledge to support Greece. European shares also opened
higher, extending a winning run to a fifth session on Friday.
[MKTS/GLOB]

FUNDAMENTALS
* Deliverable copper inventories in warehouses monitored by
the Shanghai Futures Exchange rose 3 percent from one week
earlier, while deliverable aluminium inventories rose 1 percent,
the exchange said on Friday. [ID:nBJD003497]
* China said its aluminium industry faces severe
overcapacity, with the total smelting capacity at about 20
million tonnes, exceeding demand by 7 million tonnes.
[ID:nTOE61A074]
* China’s top steel firm, Baosteel (600019.SS: Quote), hiked March
prices of hot- and cold-rolled steel coil by 300 yuan ($43.91) a
tonne bringing them to the highest levels since November 2008,
two industry sources said on Friday. [ID:nTOE61B01S]
* Tajikistan, Central Asia’s largest aluminium producer, cut
its output of the metal by 4.1 percent year-on-year to 30,158
tonnes in January, a source at state-owned aluminium company
TALCO said on Friday. [ID:nLDE61B05L]
* Kazakh copper miner Kazakhmys (KAZ.L: Quote) said its Boschekul
copper facility, set for 2014 launch, would produce about
100,000 tonnes of copper concentrate a year. [ID:nLDE61B04R]
* Belgian specialty metals and materials group Umicore
(UMI.BR: Quote) is interested in acquiring the catalyst unit of
Germany’s Sued-Chemie (SUCG.DE: Quote), Belgian business daily De Tijd
said on Friday. [ID:nLDE61B03C]

TECHNICALS
* Copper support at $6,800, resistance at $7,055, 14-day RSI
at 55.0.
* Aluminium support at $2,020, resistance at $2,095, 14-day
RSI at 42.5.
For related news and prices, click on the codes in brackets:
LME price overview RING= LME aluminium <0#MAL:>
LME copper <0#MCU:> Asia physicals <BASE/ASIA1>
COMEX copper futures <0#HG:> Europe physicals <BASE/EU>
Scrap metal prices BASEU3 LME plastics <LME/PLASTICS>
RELATED NEWS AND OTHER TOPICS
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SPEED GUIDES
COMMODS METAL1 <BASE/FUT1> <BASE/CASH1> <BASE/OPT1>
<LME/OPT1> <LME/FUT1> <LME/BROKER1> <LME/INFO1> REUTERS
For Reuters Metals Production Database click on URL below
mpd.session.rservices.co

As production ramps up, for the months of December 2009 and January 2010, Surda mine set several new production records. For the month of January, Surda Mine hoisted 36,973 tonnes and tramming for the same month was 39,404 tonnes, which set new records.

For the month of January, the Surda Mine produced over 305 tonnes of metal-in-concentrate for delivery to Hindustan Copper Limited’s (HCL’s) nearby smelter.

IRL Managing Director, Arvind Misra, said that it is a significant step for IRL to grow the business in the 2010 year which began with the signing of a coal mine development Letter of Intent with Bankura DRI.

The increase in broken tonnage capacity, was achieved by to efficiency improvements, will be further enhanced by the addition of new higher grade areas on the lower northern end of the mine.

The impact of mining in higher grade areas and ongoing production efficiency improvements are expected enable the Surda Mine to achieve a targeted production level of 340 tonnes metal in concentrate per month.

The Surda Copper Project is owned by Hindustan Copper Limited (HCL) and now operated by India Resources Limited in the state of Jharkhand.

The mine is one of several older mines on the Singhbhum Copper Belt which have hundred’s of years of mining history but were progressively abandoned due to low copper prices between 1998 and 2004.

IRL started refurbishing the mine and the concentrator plant at the abandoned Mosaboni site in July 2007. Production is now at record levels due to the efficiencies and techniques brought to the project by the Australian operators as well as the local experience and knowledge.

Cash flows from the Surda Mine and other proposed facilities available to IRL will contribute to the funding for the development of the Bankura coal project and other exploration projects.

Sales for the quarter more than doubled year-on-year to C$290,57-million, compared with C$139,63-million in the same period of 2008, Inmet reported on Tuesday.

The company expects copper output in 2010 to rise by some 50% as it ramps up production at the new Las Cruces mine, in Spain, while gold sales volumes will be lower because production at the Troilus mine is scheduled to end around mid-year.

Zinc production will be higher than in 2009 because of plans to mine higher-grades at the Pyhasalmi mine, Inmet said.

Shares in the Toronto-based company rose 2,5% on Tuesday morning, to C$54,16 apiece by 9:52 ET.

Taseko will receive the prevailing market copper price while it is within the price range. Should the market price be outside the price range, Taseko will receive a minimum of US$2.50 and a maximum of US$3.95 per pound for the hedged copper. Remaining production from Gibraltar is unhedged.

Taseko recently raised C$180 million by selling 25% of the Gibraltar mine to Sojitz Corp. of Japan. Capacity is being expanded to 30,000 t/d.

* Falling dollar supports; last week’s sell-off overdone

(Update official prices, adds detail)

LONDON, Feb 8  - Copper rose more than 3 percent on Monday, rebounding from three-month lows hit late last week, as bargain hunting among traders and industry consumers helped push industrial metal prices higher.

Benchmark copper for three-month delivery MCU3 on the London Metal Exchange traded at $6,346 a tonne from $6,265 at the close on Friday, compared with a session high at $6,475.

“There was a big sell-off on everything last week and it was probably overdone,” said Herwig Schmidt, head of sales at Triland Metals. “Maybe this is a good buying opportunity.”

“Today is amazingly quiet after last week’s mayhem,” he added. “There is a little buying interest from the industry … consumers of copper, for tubes and wires, have been virtually absent from the market over the last eight months.”

Benchmark copper for March delivery on the New York Mercantile Exchange’s Comex division plunged 11.60 cents, or 3.75 per cent, to finish at $2.9735 a pound, its lowest level on a settlement basis since Nov. 12.

Over at the London Metal Exchange, copper for three-month delivery closed down $230 at $6,590 a tonne, after dealing in a wide range between $6,948 and $6,545, another low dating back to the middle of November.

“It’s primarily dollar-related,” Michael Gross, futures analyst with Optionsellers.com in Tampa, Fla., said of the selloff.

“The sharp [dollar] upswing shows there are additional concerns about credit problems overseas in Europe.”

The dollar rose broadly after the European Commission backed a Greek deficit-cutting plan as expected and worries mounted over the fiscal health of Portugal.

A firm U.S. currency makes metals priced in dollars more expensive for holders of other currencies.

On the economic front, the pace of U.S. private sector job losses slowed in January, while modest growth was seen in the U.S. services sector.

This data followed more upbeat data that included Tuesday’s home sales numbers, Monday’s manufacturing figures and economic growth data on Friday.

“It’s [economic data] been a see-saw … fits and starts,” Mr. Gross said. “It’s going to be more of a daily thing, whereas copper is reacting now to more of the bigger macroeconomic factors.”

Copper was hit in late January by investors’ fears that signs of monetary tightening in China could choke demand from the world’s top consumer of industrial metals.

“China’s macro environment has changed from one predominantly focused on growth to one where balancing growth and inflation has become increasingly important to policy makers,” Barclays Capital said in a note.

“Given China’s importance to key commodity markets, these moves have had a noticeable impact on sentiment.”

LME copper stocks fell 675 tonnes to 540,475 tonnes. At the end of last week, copper inventories rose to about 543,500 tonnes to hit their highest level since last February.

Stocks of aluminum, (AL-FT) used in transport and packaging, dropped 6,600 tonnes, but held near a record high above 4.6 million tonnes.

A large portion of those aluminum stocks are tied up in finance deals, to release cash for producers and to earn banks higher returns than they would get in money markets.

Aluminum ended at $2,083 from $2,120. Analysts said improving U.S. auto sales was boosting sentiment.

“Over all, an annualized figure of 10.80 million units represents a solid figure especially given the state of the economy,” Standard Bank said in a note.

“It will take time for sales to recover back to pre-crisis levels, however the steady increase in sales is another positive sign that should continue to underpin … industrial metal prices.”

Zinc closed at $2,095 from $2,160, while battery material lead ended at $2,020 from $2,118 but earlier slipped 5 per cent at $2,010.25 to track other metals lower.

Tin closed at $16,600 from $16,450 and steel-making component nickel was last bid at $18,195 from $18,300.

Pending sales of previously owned US homes edged up as expected in December, a survey showed, allaying some fears of renewed weakness in the troubled sector. That came on the heels of a string of positive GDP and manufacturing numbers since Friday.

“The numbers are good, but we need a little more consistency. The pattern has been for a string of positive numbers followed by one or two poorer indicators,” a dealer in Hong Kong said.

“We are holding our breath now ahead of the payrolls report at the end of the week. There is a sense that payrolls may finally reverse their long decline. But if we see another big drop the budding confidence the market is feeling will shatter.”

The median forecast for nonfarm payrolls is for an increase of 5,000 after an unexpected 85,000 drop in December. A rise would be only the second increase since December 2007.

Three-month copper on the London Metal Exchange rose $75 to $6,895 a ton by 0715 GMT, recovering after it hit $6,600 on Monday, its lowest since mid-November, having tumbled as much as 15 percent in the previous three weeks.

“We finally got the much talked of pre-Lunar New Year sell-off, but the Chinese are still not buying much because they will be shut for a week,” said Nirrav Sharma of G-Steelmet, a Singapore-based trading house.

“In reality, we are seeing an adjustment – some funds are exiting, creating opportunities for others to get in. People are calling for the market to trade between $6,700 to $7,000 for a while.”

Benchmark third-month Shanghai copper rose 1,540 yuan by the close to 55,820 yuan.

Southern Copper Corp, one of the world’s largest copper producers, said it sees average copper prices at $3.25 per pound ($7,165 a ton) in 2010, as it expects emerging and developed economies to boost demand for the metal.

“We believe that inventories of copper will start to die off during the year, reversing the last month’s trend,” Southern Copper’s Chief Financial Officer Genaro Guerrero said on a conference call with investors.

“We’re going to see a catastrophe in the market,” Threlkeld said yesterday.

Prices might slump to less than $1 (R7.55) a pound, equivalent to $2 205 a ton, or a third of yesterday’s price, said Threlkeld, who first got the world’s attention in 1996 when he showed that hoarding by Sumitomo would lead to a collapse.

“Some 90 percent of buying has been from speculators,” he said.

“Whether they are exchange-traded fund speculators or China pig farmer speculators it doesn’t really matter, because that buying is going to come back to the market.”

Three-month copper futures on the London Metal Exchange, which surged 140 percent last year after governments spent billions of dollars to lift their economies out of recession, traded yesterday at $6 750 a ton.

China, the world’s largest user, imported a record 3.2 million tons of the refined metal last year, up 119 percent from the previous year.

There were about 3 million tons of unreported inventories in China, said Threlkeld, who has traded the market for more than 40 years.

“Three million tons seems a bit excessive, given that that’s more than half of China’s total consumption last year,” said Li Rong, the chief analyst at Great Wall Futures. China’s copper consumption was about 5 million tons in 2009, he said.

“The price of copper is not just a function of how much inventory there is in the market,” said Li Junchao, an analyst at Western Mining’s futures department. “While it’s true that prices last year rallied way beyond their fundamentals, we expect the market to normalise this year.

* Puts 2010 copper estimate at 500,000 tonnes

* Says to produce 18,500 tonnes of molybdenum this year

* Still no restart date for strike-hit Cananea

LIMA, Feb 2 – Southern Copper Corp, one of the world’s largest copper producers, said on Tuesday it sees average copper prices at $3.25 per pound in 2010, as it expects emerging and developed economies to boost demand of the metal.

Copper, which is used in construction, rose 140 percent in 2009 on strong Chinese buying and supply concerns, but fell 8.5 percent in January as rising inventories suggested demand outside China was weak.

U.S. copper futures <HGHO> settled up 0.2 percent on Tuesday at $3.0895 a lb in New York.

“We believe that inventories of copper will start to die off during the year, reversing the last month’s trend,” Southern Copper’s Chief Financial Officer Genaro Guerrero said on a conference call with investors.

He said he expected buying from emerging economies like China to support prices through this year, as well as rising consumption in developed countries like the United States.

Southern Copper <PCU.N> <SPC.LM> also gave guidance for its 2010 production on the call.

It put its copper production estimate for this year at 500,000 tonnes, slightly above the 485,376 tonnes it mined this year, and its molybdenum forecast at 18,500 tonnes, in line with last year’s output.

The company said it expected its zinc sales this year be around 110,000 tonnes and its silver sales to come in near 16 million ounces in 2010.

CANANEA RESTART

Southern Copper, a unit of Grupo Mexico <GMEXICOB.MX>, operates the giant Cananea mine in Mexico, which historically has produced some 20 percent of the company’s copper output and has been hit by a strike for the past two years.

The company made a fresh offer to unionized workers late last month, but the union said miners would not accept it.

When asked when Southern Copper might be able to restart operations at the mine, Guerrero said he had no estimate.

TREND: BEARISH

TRADING LEVELS:

This week market is expected to find good support in the range of 309-307 levels. And strong support is seen at 302.40-300.40 levels.

Trading below 300 would lead to lower prices initially towards 297.50 then 293.80 and then finally towards 287 levels.

Resistance is observed in the range of 318-320 levels and strong resistance is seen at 324-326 levels.

Trading above 326.50 would lead to higher prices initially towards 330 then 333 and then finally towards the major resistance at 338 levels.

Recommendation: Sell MCX Copper Feb in the range of 318-320 with strict stop-loss above 328 Targeting initially 307 levels and then 304.

Lu Youqing, vice-president of Aluminium Corp of China (Chinalco), said that the state-owned group was studying worldwide copper resources to identify the best investment opportunities.

“Copper is our next main development target,” Mr Lu said in an interview with Reuters, citing Toronto-listed Ivanhoe Mines’ copper-gold project in Mongolia as a potential target. Mr Lu declined to comment on the amount of money that Chinalco has earmarked to make such purchases, however, he said the company is yet to enter talks with any potential sellers.

Copper prices have surged by 130pc since the start of 2009, with the aluminium price up a more modest 44pc, The positive outlook for copper prices prompted Chinalco to establish a subsidiary last year, China Copper Company. The unit now has about 60bn yuan of assets, but there are no imminent plans to list the business separately, Mr Liu said.

In June last year, Rio Tinto spurned Chinalco’s proposed $19.5bn cash injection, which would have doubled the Chinese group’s stake in the miner to 18pc. Instead, Rio undertook a deeply-discounted rights issue and put its Australian iron ore assets into a joint venture with BHP Billiton. Yesterday, the European Union launched an antitrust probe into the proposed iron ore venture, which had been widely expected.

Chinalco currently owns 9pc of Rio Tinto and Mr Lu also denied the recent rumour that the company was about to sell its stake to China Investment Corp, China’s sovereign wealth fund.

Chinese companies spent more than $30bn buying foreign mines and oil deposits last year, as asset prices tumbled. Analysts are generally downbeat on prospects for the aluminium price, but more bullish on copper.

Chinalco also said yesterday that it had posted a profit in the second half of the year, compared with a loss in the first half of 2009. No profit figure was revealed, but the company’s full-year sales rose 10pc to 142bn yuan. In December, capacity utilisation at its aluminium operations exceeded 90pc, with production costs falling 17pc over the year.

Outlook

Copper prices could trade higher on expectations of higher imports in China. A weaker dollar could additionally add to the upside. Crude oil prices are expected to rise as OPEC is not expected to raise production this year and Chinese imports could rise further. Gold prices could rise, taking cues from the weakness in the dollar. The US markets remain closed on account of Martin Luther King Day today

The Federal Reserve has kept its target rate at zero percent to 0.25% since December 2008 to revive the economy. On the back of expectations of a lower interest rate in the US, the dollar is expected to weaken further. Weakness in the dollar will help gold prices as a weaker dollar will make the yellow metal look attractive for holders of other currencies.

Copper prices gained almost 2% till 5.00 pm IST as continued Chinese buying coupled with the first inventory decline in 52 days supported an upside in prices. Copper prices traded above $7500 on the LME today on expectations of higher imports by China in the coming months. Prices could continue to trade higher as upcoming data releases by China on Thursday include – GDP, industrial output and detailed trade data. Chinese economic data is expected to come on the positive side and may boost prices further.

China’s top copper smelter Jiangxi Copper had not signed 2010 fees with BHP as of Friday morning, a senior executive told Reuters.

It has agreed on the fees at $46.5 and 4.65 cents with Freeport.

When asked whether Jiangxi Copper would sign the same fees with BHP, he said: “It is the trend.”

Both Japanese and Chinese smelters had said that the processing fees agreed with Freeport should be the benchmark for 2010.

Treatment and refining charges are fees paid by miners to smelters to convert imported concentrates into refined copper, and are deducted from sale prices, based on London Metal Exchange copper prices.
The fees were set at $46.5 per tonne and 4.65 cents per pound for processing copper concentrate into metal, the same level as those set with Freeport-McMoRan & Gold late last year.

“Japanese smelters have agreed on the level, which is the same as those set with Freeport,” said an industry source close to the talks, but who declined to be named due the sensitive nature of the information.

The levels, down from $75/7.5 cents set for the calendar 2009 contract, are the lowest since the 2008/09 mid-year contract when processing fees were set at $42.5/4.25 cents.

The mid-year contracts provide terms for copper concentrate supplies for the 12 months starting in July.

The fees were set at $46.5 per tonne and 4.65 cents per pound for processing copper concentrate into metal, the same level as those set with Freeport-McMoRan & Gold late last year.

“Japanese smelters have agreed on the level, which is the same as those set with Freeport,” said an industry source close to the talks, but who declined to be named due the sensitive nature of the information.

The levels, down from $75/7.5 cents set for the calendar 2009 contract, are the lowest since the 2008/09 mid-year contract when processing fees were set at $42.5/4.25 cents.

The mid-year contracts provide terms for copper concentrate supplies for the 12 months starting in July.

The talks with BHP were drawn out as the major miner had been seeking an even deeper cut of about 43 percent.

China’s top copper smelter Jiangxi Copper had not signed 2010 fees with BHP as of Friday morning, a senior executive told Reuters.

It has agreed on the fees at $46.5 and 4.65 cents with Freeport.

When asked whether Jiangxi Copper would sign the same fees with BHP, he said: “It is the trend.”

Both Japanese and Chinese smelters had said that the processing fees agreed with Freeport should be the benchmark for 2010.

Treatment and refining charges are fees paid by miners to smelters to convert imported concentrates into refined copper, and are deducted from sale prices, based on London Metal Exchange copper prices.

* Copper fees lowest since $42.5/4.25 cts for 08/09 mid yr (Adds detail)

TOKYO, Jan 15 (Reuters) – Some Japanese smelters have agreed to a 38 percent cut in copper treatment and refining charges (TC/RCs) for 2010 with BHP Billiton Plc/LTD, an industry source said on Friday. The fees were set at $46.5 per tonne and 4.65 cents per pound for processing copper concentrate into metal, the same level as those set with Freeport-McMoRan & Gold Inc late last year.

“Japanese smelters have agreed on the level, which is the same as those set with Freeport,” said an industry source close to the talks, but who declined to be named due the sensitive nature of the information. The levels, down from $75/7.5 cents set for the calendar 2009 contract, are the lowest since the 2008/09 mid-year contract when processing fees were set at $42.5/4.25 cents.

The mid-year contracts provide terms for copper concentrate supplies for the 12 months starting in July. The talks with BHP were drawn out as the major miner had been seeking an even deeper cut of about 43 percent.

China’s top copper smelter Jiangxi Copper had not signed 2010 fees with BHP as of Friday morning, a senior executive told Reuters. It has agreed on the fees at $46.5 and 4.65 cents with Freeport.

When asked whether Jiangxi Copper would sign the same fees with BHP, he said: “It is the trend.” Both Japanese and Chinese smelters had said that the processing fees agreed with Freeport should be the benchmark for 2010.

Treatment and refining charges are fees paid by miners to smelters to convert imported concentrates into refined copper, and are deducted from sale prices, based on London Metal Exchange copper prices. (Reporting by Miho Yoshikawa and Polly Yam; Editing by Joseph Radford) 2010-01-15 05:32:51

Tin was the only metal that bucked the trend, rising 2.5 per cent to hit its highest since September 2008, as the fundamentals for the metal have improved after recent upbeat data and tighter exports from the top producer Indonesia.

Benchmark copper for delivery in three months on the London Metal Exchange edged down to $7,555 (U.S.) a tonne by 1100 GMT, from Monday’s $7,567.5 a tonne. The metal, used extensively in construction, touched a 17-month high last week.

The U.S. dollar was flat a basket of currencies, holding on gains made after an official from a Chinese sovereign wealth fund said he did not think the U.S. currency would depreciate more.

“One reason why metals are falling is the dollar,” said metals analyst Daniel Brebner at Deutsche Bank. “Also Alcoa numbers that came after the market’s close yesterday were pretty weak and are dampening the market,” he said.

Alcoa Inc. , one of the world’s largest aluminum producers, posted a narrower quarterly loss on Monday, but the results fell short of expectations.

The company said although aluminum prices are climbing, demand from some customers, especially plane makers and the commercial construction sector, was not expected to improve soon.

Disconnect

In the face of persistently weak demand, rising global stockpiles are a major concern among investors. Chile’s mining minister warned on Monday that copper prices could face a downward correction as inventories climb.

Copper stocks rose by 1,975 tonnes to 517,175 tonnes, their highest since March 2009, while nickel stocks are at 159,726 tonnes, just below Monday’s record high of 159,792 tonnes.

“The feedback from the physical desk echoes what the Chileans are saying – demand is pretty lacklustre – indeed, producers are asking if we can take more material,” a senior trader based in Singapore said.

“There are periods of disconnects between the fundamentals and prices and this is clearly one of those periods. The prices are looking a little over extended at this point,” Mr. Brebner said, adding that there could be further falls for zinc.

LME zinc inventories fell by over 2,000 tonnes, but a 30 per cent rise in Shanghai zinc stocks offset any potential boost to the zinc price which was at $2,543 a tonne versus $2,573 the day before.

Aluminum inventories also fell by 3,675 tonnes, but prices were down at $2,321 a tonne from Monday’s $2,330 a tonne. Traders said worries about power shortages in China and upbeat assessments on demand from UC Rusal could help ward off a larger decline.

Around 70 per cent of the total 4.6 million tonnes of aluminum stocks in LME warehouses are said to be tied up in financing deals. Aluminum cancelled warrants – material earmarked for delivery – stood at 244,700 tonnes, equivalent to the 18 per cent of the remaining 30 per cent.

Nickel was at $17,997 a tonne from Monday’s $17,890 a tonne while lead was at $2,500 a tonne from $2,532 a tonne.

Tin rallied as high as $18,350 a tonne, before easing to $18,275 a tonne versus $17,890 a tonne.

“We said last month that tin prices were finally threatening to break higher, having traded in a sideways direction since June when they decoupled from the uptrends in the other metals,” Standard Bank said in a research note.

“Based on our upwardly-revised forecasts, we are looking for a further increase of 29 per cent this year as the global economy recovers, demand improves and as restocking gets under way.”

Shanghai copper has now risen for 10 consecutive days, matching record runs of rises in December 2005 and April 1994.

The third-month Shanghai aluminum futures contract rose by its daily 5 percent limit from the previous session’s settlement to 18,045 yuan a ton, as investors worried the harsh winter weather could disrupt supplies.

“The weather has had some impact on our production,” said an executive at an aluminum smelter in central China’s Henan province, which is a major aluminum producer, and was recently hit by the cold spell. “We get reduced power supply for some hours of the day. But so far the impact is not significant.”

The US released mixed economic data on Tuesday, showing sharper than expected home sales in November, but a surge in new factory orders offered assurance the economic recovery remained on track.

Recent manufacturing data from the US and China pointing to a steady economic recovery painted a rosy picture for industrial metals demand.

“The bullish sentiment in the market is extremely strong these days. We’ll see prices continuing to rise before a correction, possibly around the level $7,700 to $7,800 a ton,” said Wang Zhouyi, an analyst at Shanghai CIFCO Futures. “Some investors who closed their positions before the New Year’s Day holiday are now back buying again.”

Shanghai’s benchmark third-month copper futures contract hit a 17-month high of 61,850 yuan a ton, before ending at 61,650 yuan, up 2 percent, its biggest daily gain in two weeks. The most-active contract for April delivery rose 1.7 percent to 61,630 yuan a ton.

Three-month copper on the London Metal Exchange hit $7,606, highest since Aug 28, 2008, before easing to $7,590 a ton by 0700 GMT.

But some analysts warned the frenzy could fizzle soon.

“The upward momentum in copper is nearing an end, partly as prices are under the pressure from commodity index rebalancing. The growing LME stocks also weigh,” said Peng Qiang, an analyst at COFCO Futures.

 FUNDAMENTALS

 * Three-month copper on the London Metal Exchange MCU3
rose $125 to close at $7,500 a tonne on Monday, and edged
higher to $7,506 in after-hour trading.

 * When Shanghai closed on Monday, LME copper stood at
$7,430 a tonne.

 * Investors were encouraged by upbeat U.S. manufacturing
sector data released on Monday, which showed the sector grew at
its fastest pace in nearly four years in December, its fifth
consecutive month of expansion. [ID:nN04237488]

 * But headwinds remain, as a separate report showed
construction spending in November fell to a more than six-year
low, dragged by a sharp decline in homebuilding.

 * In Chile, Codelco made an improved wage offer to workers
at its huge Chiquicamata copper mine in a bid to defuse a
day-old strike that had helped boost global copper prices.
[ID:nN04228293]

 * The five-month strike at Brazilian miner Vale's
(VALE5.SA: Quote) Voisey's Bay nickel mine in Canada is nowhere near
an end, as the mediated talks between Vale and union leaders
failed to bring the two sides back to the bargaining table.
[ID:nN04196713]

 * LME's nickel stocks rose 414 tonnes to a new all-time
high at 158,424 tonnes on Monday.

 MARKET NEWS

 * U.S. stocks climbed broadly on Monday after an upbeat
U.S. manufacturing sector data, lifting confidence in the
global economy as investors eye fourth-quarter earnings.
[ID:nN04247972]

 *  The U.S. dollar weakened as optimism about a global
economic recovery encouraged investors to seek riskier
investments such as stocks and commodities at the expense of
the greenback. [USD/]

 DATA/EVENTS

 * The following data is expected on Tuesday:

 - France consumer confidence                      (0745
GMT)

 - Germany unemployment rate, total                (0900
GMT)

 - Euro zone Consumer Prices Index (CPI) for Dec   (1000
GMT)

 - ICSC/Goldman Sachs weekly U.S. chain store sales(1245
GMT)

 - Canada producer prices, raw material prices     (1330
GMT)

 - Redbook weekly U.S. retail sales                (1355
GMT)

 - U.S. factory orders for November                (1500
GMT)

 - U.S. pending home sales, November               (1500
GMT)

 - U.S. auto sales

 RELATED NEWS
 > METALS-Copper rallies to 16-mth top on demand prospects
[ID:nLDE6030L4]
 > Chile Codelco makes offer to defuse Chuqui strike
[ID:nN04228293]
 > Vale, union say won't restart Voisey's Bay talks
[ID:nN04196713]
 > Venezuela may shut metal output to save power-paper
[ID:nN04240130]
 > Chalco raised alumina prices 5.7 pct on Dec 31
[ID:nTOE60308U]
 > FACTBOX-Chile's Codelco copper output since
2000[ID:nN04233919]

Defying the Dollar

The dollar remained strong against the yen and other key rivals, but copper took its cue more from the looming strike as well as the better than expected Chicago PMI. As such, the rebound in dollar had little impact on copper (as well as other industrial metals) on confidence about the bull-run into 2010, thanks mostly to speculative buying.

So far, the red metal has more than doubled this year, leading gains in the CRB Index of 19 raw materials, and climbed almost fourfold in the decade as consumption rose in emerging economies including Chindia.

However, despite the improving global economic backdrop, there is far from a consensus on how copper will fare throughout the next 12 months.

2009 – Beyond Reality

Despite its red hot streak in 2009, copper’s continuous rally in the face of swelling inventories, a sign of weak consumption, has perplexed many in the market. Stockpiles and production worldwide have steadily increased this year alongside with copper prices. (Fig. 2)

The latest data showed London Metals Exchange (LME) stocks rose 6,375 tons to above 500,000 tons, their highest level since April. Furthermore, the almost 600,000 tonnes in LME and Shanghai exchange warehouses are enough to cover the lost output from strike at Chuquicamata for more than a year.

Copper A LA Gold

China’s unprecedented $585 billion infrastructure-focused stimulus package and strategic stockpiling efforts have had a major impact on copper prices this year. This is evidenced by the 165% year-over-year surge of China’s imports of refined copper to 2.58 million tonnes in the first nine months of 2009.

On that note, the market has looked beyond warehouses. Some even say copper is behaving more like gold rather than strictly a base metal. (Fig. 3)

Of course, a number of other factors such as an anticipated global economic revival, new investment cash, index/fund buying, a weaker U.S. dollar, concern over labor disruptions, have also contributed to overshadow bearish indications of the copper inventory build-up.

Copper Currency Standard?

While India is trying to accumulate gold reserves, China is going one step forward by buying up industrial metals on a scale that appears beyond the usual commercial reasons. Some believe Beijing may have made a strategic decision to stockpile metal as an alternative to US Treasuries and dollar holdings as it safeguards China’s industrial revolution, while the West may one day face a supply crisis.

Speculation of an ultimate “Copper Standard” also swirled when in March, 2009, Zhou Xiaochuan, the governor of People’s Bank of China, reportedly called for a world currency modelled on the “Bancor”. The Bancor was to be anchored on 30 commodities – a broader base than the Gold Standard.

Copper “The Red Gold”?

Meanwhile, India’s $1.2 trillion economy expanded 7.9% in the 3rd quarter of 2009, the quickest pace in six quarters. The growth lagged behind only China among the world’s major economies with equally strong demand from auto and power sectors. Copper demand in India is expected to soar by 6% next year, in line with the GDP growth forecast of 7%. .

As China and India each is looking to compete and develop their economies together, India could step up their copper buying efforts as well. Then, currency standard or not, copper could become the ultimate red gold as a strategic asset as well as an inflation hedge.

Electric Avenue Will Take It Higher

China is expected to expand 8.5% this year, according to the median estimate of economists surveyed by Bloomberg. Urbanization plus the next industrial revolution led by hybrid cars need plenty of copper. China plans to boost its annual production of electric or hybrid cars to 500,000 in the next two years, up from 2,100 last year. Such a shift would require huge amounts of electrically conductive copper.

Technically Bullish

Copper prices are still off their all-time high of $8,940 on LME notched in July 2008, before the global economic downturn caused markets to tumble.

Most of the technical signals for copper (Fig. 1) are very bullish, albeit a bit over-bought on some indicators like RSI & Bollinger Bands. But since the market just put in a new high, it may continue to become more overbought before corrections may occur.

Right now, it looks like the $7,500 to $7,600 levels should be the next resistance with potential retracement towards $6,500 and $5,800 levels. But if Western recovery continues to disappoint, or remain mixed, as they currently are, then we could see prices revert back to between $5,000/t to $6,000/t in 2010.

Chinese Copper Control

China is the world’s largest copper consumer with about 38% market share, and its record levels of copper imports this year has made up for some of the slack demand in the U.S. and Europe. Copper, the hottest among the base metals, is controlled mostly by China as the single largest buyer in the world.

Now, some market participants say imports of refined copper into China may not reflect demand for at least the next six months, or longer, as China digests stocks built this year as a result of record imports.

In addition, China Daily reported on Nov. 12, 2009 that copper stockpiles held in duty-free warehouses in China may be re-exported after surging to as much as 350,000 tons from almost none at the start of the year. The country’s imports of refined copper may lower to 1.6 million tons in 2010. However, the 350,000 tons reportedly belong to mostly private speculators and account for a fraction of the total imports.

Clearly, there is some copper supply/demand imbalance in China as the country is not entirely immune to this synchronized global recession. However, with copper price doubling up in 2009 and as China generally prefers buying on the dip, this re-export could also be a strategic tactic of Beijing in an attempt to push down the prices of copper.

2010 – Reality Bites

The general “recovery trade”, predicated primarily on China and other emerging economies infrastructure and industrial growth, lifted copper to overshoot the underlying fundamentals and somewhat disconnected from reality in 2009.

The continued rising copper stocks suggest demand has yet to recover outside China. As we enter 2010 with China taking an expected copper break, the trend for copper prices will increasingly be determined by the shape of economic recovery in the OECD.

The U.S. is the dominant focus for signs of recovery. The EU 15, which accounts for about 20% of global copper consumption, is also important, but the lead will come from the US.

The past 12 month it’s been a variety of reasons that lifted all commodities higher. Copper will unlikely have a repeat performance of 2009. The strength in copper may remain at least in the first quarter of 2010, but after that the market will face a lot of uncertainties regarding the Dollar, interest rate, monetary policy, China’s copper imports/exports change, and the high inventories as well.

An Economic Precursor

Either as a currency or as a new precious metal, one thing for sure is that copper is a bellwether for the economy because it is mainly used in housing, power generation and other cyclical sectors; therefore, it tends to lead other commodities.

Copper price dynamics over the next year or two could serve as a precursor to see if Asia can shift its focus from an export-oriented model to one that’s more internal consumer-based, as well as a realistic gauge of the global economy.

The figure represented a rise of 14% from 702 000 tonnes last year.

Kang said Jiangxi Copper’s smelting and refining facilities in Jiangxi province would resume full operations on Thursday after the repairs.

He added the current power supply tightness in Jiangxi province was not expected to cut the company’s production.

“The possibility of cutting power supply to us is little since we are a major company here.”

Jiangxi Copper has not yet decided whether it would run at full capacity to produce 900 000 t of refined copper next year, depending on supply of raw materials concentrate and scrap, Kang said.

The firm has a designed smelting capacity of 600 000 t a year using copper concentrate as feed. It also operates another 200 000 t of designed smelting capacity using scrap as feed in Guixi city.

The two smelting systems could run above designed capacity and reach a total of 900 000 t a year. It also has 900 000 t of annual refining capacity.

China, the world’s top copper consumer and the driver of a nearly 140 percent rise on London Metal Exchange copper prices this year, heavily relies on imports of concentrate and scrap for refined copper production.

Strike votes at two large Chilean copper operations, Codelco’s Chuquicamata mine and Xstrata PLC’s Altonorte smelter, are seen lifting sentiment as the year grinds to a close and investors assess what next from markets that have rallied around 140 percent this year,

“The strength in copper is likely to continue at least through January, as sentiment is very optimistic and so far there doesn’t seem to be any major news that would alter the trend,” Guo Yong, an analyst at Jinrui Futures, said.

“Investors are paying very little attention to fundamentals these days — it’s mainly the investment demand that’s pushing copper prices up. Spot copper isn’t selling well, consumers still think the current prices are too high.”

London Metal Exchange copper jumped 2.8 percent to $7,265 by 0707 GMT from Thursday’s evening evaluation of $7,070, after a four-day hiatus. Copper earlier touched $7,273, its highest since early September 2008.

Benchmark third-month Shanghai copper rose 100 yuan to 58,360 yuan a tonne at the close, having scored a 16-month peak in the previous session. The more-active fourth month, April, rose 60 yuan to 58,590 yuan.

Worries about the 42 percent rise in LME stocks and the 485 percent surge in inventories in Shanghai this year could be soothed a little after workers at the two large Chilean operations voted to strike.

The vote at Chuquicamata threatens output of around 4 percent of the world’s copper concentrate, while the vote at Xstrata PLC’s Altonorte smelter could cut 1.5 percent of global output of copper anode.

“Those Chileans have dealt a double blow to copper bears. These strikes will lift copper sentiment, but industrial action in Chile rarely lasts, so unless they are really dug in it won’t change the fundamentals much,” a dealer in Singapore said,

Shanghai zinc dipped 30 yuan to 20,340, having scored a 20-month high in the previous session, while aluminium rose 1.1 percent to 16,980 yuan, and earlier hit a new 15-½ month peak of 17,030 yuan.

LME aluminium rose 1.1 percent to $2,280 from an evening evaluation of $2,255 on Christmas Eve, while zinc jumped 3.3 percent from Thursday’s assessed value, to $2,578, retreating $10 from an earlier peak when prices hit their highest since mid-March 2008.

Aluminium may see support after news that output from the world’s biggest bauxite miner, Guinea, fell by more than a fifth in the first nine months of 2009 due to “institutional instability”.

State-owned Codelco said it was considering whether to seek five days of government mediation to head off a strike, and would use “all appropriate mechanisms”.

A strike could curb production by 1,800 tonnes a day. Copper prices rose 3pc to a 15-month high in London on supply fears, but slipped later in New York on other factors.

Union leaders at the mine had expected workers to accept Codelco’s wage offer, and said the ballot to reject the deal was close, with just a few dozen votes tipping the balance

Some workers scuffled with union officials afterwards, spraying water and chanting “Together, Chuqui will never be conquered”.

A strike would be the most serious by Codelco’s unionised workers since 1996.

President Michelle Bachelet, whose government has relied heavily on billions of dollars in windfall copper savings to fund fiscal stimulus to counter the impact of global financial crisis and Chile’s first recession in a decade, appealed to workers to reconsider.

— Copper prices closed down on Tuesday, as concerns about swollen inventory levels weighed on sentiment and investor position-squaring picked up pace as the dollar extended its late-year rally.

“The fundamentals of copper aren’t that fantastic at the moment and I think we are seeing some recognition of that. LME stocks continue to move higher,” said Dan Smith, a metals analyst at Standard Chartered.

Benchmark copper for March delivery on the New York Mercantile Exchange’s COMEX division shed 2.05 cents to end at $3.1380 a lb.

On the London Metal Exchange (LME), copper for three-months delivery ended at $6,881 (U.S.) a tonne, down from a close of $6,940 on Monday.

Highlighting still weak physical demand, copper stocks in LME warehouses rose 1,450 tonnes to total 480,900 tonnes, the highest since mid-April.

Additional pressure stemmed from the U.S. dollar, which rose to its highest level in nearly two months against the yen on Tuesday as U.S. bond yields rose after strong housing data underpinned expectations for a U.S. economic recovery.

Against the euro, the American currency hit a 3-1/2 month peak amid ongoing worries about Greece’s fiscal health.

“The dollar is up a little bit today, and that is causing some folks to lighten up ahead of the holidays,” said Sterling Smith, an analyst for Country Hedging Inc in St. Paul, Minnesota.

Some New York energy and commodity markets will close early on Thursday, Dec. 24, and all will be closed on Friday for Christmas Day.

Copper’s losses were limited however, as arbitrage opportunities between the Shanghai Futures Exchange and the LME suggested increased future shipments of the metal into China, the world’s top metals consumer.

“The one thing I am paying most attention to is the China price holding up against the LME,” said Catherine Virga, senior base metals analyst with CPM Group in New York.

“With arbitrage opportunities reappearing, I am expecting stronger imports early next year,” she said.

Data on Tuesday showed the metal giant’s refined copper imports climb 14.8 per cent in November, rebounding from a 40 per cent fall in October.

“There are Chinese manufacturers claiming they can’t meet demand for autos and appliances. It highlights the strength of Chinese consumer demand,” noted John Meyer, analyst at Fairfax.

In other metals traded, nickel ended at $17,750 from $17,900, with LME stocks rising 114 tonnes to 150,612, a whisker away from all-time record levels of 151,254 tonnes seen in 1994.

The stainless steel making ingredient hit six-week highs on Monday despite record stocks, following an announcement that Russia will reinstate a 5-per cent export tariff on the metal.

Elsewhere, aluminum ended at $2,242 from $2,268. Stocks of the metal in LME warehouses fell 3,525 tonnes but remained near record levels of around 4.6 million tonnes.

Much of the stock of the metal used in transport and packaging is tied up in financing deals however, so it is not available and its impact on prices is limited.

Zinc , used to galvanize steel, ended at $2,434 from $2,438, having hit its best level since March last year on Tuesday, while battery material lead was at $2,306 from $2,310. Tin traded at $15,825 from $15,900.

Shipments increased to 194,388 metric tons last month, the customs office said today. That’s 15 percent more than October’s level, which was the lowest since December 2008, according to data compiled by Bloomberg.

Copper reached the highest price since September 2008 this month as manufacturing in China expanded at the fastest pace in five years. The country is targeting 8 percent growth in 2010 and an 11 percent gain in industrial production, industry minister Li Yizhong said yesterday.

“Domestic prices have strengthened noticeably against London, narrowing losses on imports,” Fu Bin, an analyst at Jinrui Futures Co. said from Shenzhen. “We may see profits again if the trend continues.”

Copper for delivery in three months on the London Metal Exchange fell 0.6 percent to $6,895 a ton by 3:21 p.m. in Shanghai. It reached $7,170 on Dec. 2, the highest in almost 15 months. Shanghai copper was down as much as 0.8 percent to 55,260 yuan ($8,092) a ton.

Break Even

Buying the metal from overseas to sell in the Chinese market almost breaks even after accounting for China’s 17 percent value added tax, according to Bloomberg calculations.

“The chance is big that some 200,000 ton copper stocks may be released from bonded zones and drag down Chinese prices,” Fu said. “Traders will expedite imports before that happens.” A bonded zone holds imported goods before duty has been paid.

China may increase imports to as much as 200,000 metric tons a month in the first quarter of 2010 after higher domestic prices made purchases from overseas cheaper, according to Macquarie Group Ltd.

Copper in Shanghai last week was at the biggest premium to the London Metal Exchange price since mid-July, Macquarie analysts led by London-based Jim Lennon wrote in a report dated yesterday. More construction and car production in the Asian nation will boost demand for metals, they said.

“While the arbitrage may only be temporary, the incentive to import is consistent with our view that Chinese copper demand is booming,” they said. “The strength in Chinese prices comes despite consumers reportedly doing everything they can to avoid buying and despite estimations of stock build by some commentators well in excess of one million tons this year.”

China’s 11-month refined copper purchases more than doubled to 2.9 million tons, customs said today. November exports declined 42 percent from a 14-month high the previous month to 10,824 tons, its data showed

The start of negotiations comes as a strike at rival Sudbury nickel producer Vale (VALE5.SA: Quote, Profile, Research) enters its sixth month with no end in sight.

“I can confirm that today marked the beginning of the negotiation process for the renewal of the company’s collective agreement,” Xstrata spokesman Peter Fuchs said in an email.

Fuchs said proposals are being exchanged with the Canadian Auto Workers union, which represents mine, mill and smelter workers at the Sudbury operations.

Swiss-based Xstrata currently operates two nickel mines in Sudbury, along with milling and smelting facilities. It acquired the assets when it took over Canada’s Falconbridge in 2006, in a deal coincident with the acquisition of Canadian nickel miner Inco by Brazil’s Vale.

Xstrata cut 686 Sudbury jobs in February and reduced its operations there following last year’s collapse in nickel and copper prices.

Prices have rebounded somewhat this year, but London Metal Exchange inventories have remained high, suggesting little pressure on nickel producers to restart operations.

About 3,100 workers at Vale’s Sudbury operations went on strike in mid-July following a breakdown in talks. Also on strike are Vale’s smaller Canadian operations in Port Colborne, Ontario, and its Voisey’s Bay nickel mine in the eastern province of Newfoundland and Labrador.

Production from the mine – the world’s fourth largest copper deposit – may drop by up to 70 000 t before repairs to the main shaft are completed and full production resumes, the Australian Bureau of Agricultural and Resource Economics (ABARE) said.

Its estimate of losses from the mine is up to 40 percent higher that most analysts’ forecasts, and represents more than a third of total capacity of around 200 000 t/y.

Copper prices are already rising – up by around $1 000/t to $6 900/t since the start of October, and more than doubling so far this year – on concerns that global demand could outpace supply next year.

In its latest quarterly outlook, ABARE cut its forecast for refined copper exports by 15,8 percent for the year to June 30, 2010, and its estimate for refined copper output by 13 percent to 408 000 t.

“If realised, this will be the lowest refined copper production recorded in Australia since 1998-99,” it said.

Australia’s Macquarie Bank predicts a global copper supply deficit is looming this year that will take two years to correct, increasing its 2010/2011 copper price forecasts by two to three percent on Tuesday to $3,25/lb to $3,40/lb ($7 166/t to $7 500/t).

The bureau also revised up iron ore exports by two percent and coking coal exports by 16,2 percent, citing strong demand for raw materials by Asian steelmakers.

Chinese imports of coking and thermal coal and iron ore should remain strong into 2010, underpinning higher production from Australia mines as demand shows signs of picking up in other Australian export markets, according to the bureau.

The iron ore export trade is a high stakes business worth more than $80-billion a year.

It is dominated by Australians Rio Tinto and BHP, along with Brazil’s Vale, on the mining side, and China, the world’s biggest iron ore consumer, on the other.

“China will continue to have a significant influence over the demand for minerals and energy commodities in 2010, but consumption is also forecast to increase gradually in OECD economies,” the bureau said.

Organisation for Economic Co-operation and Development (OECD)-based consumers that drew on their own inventories as the global economic slowdown worsened, reinforcing the sharp weakening of underlying demand for industrial commodities, may soon be returning to the market to replenish stockpiles, according to the bureau.

“The rebuilding of stocks in 2010, if it occurs, will provide additional support for minerals and energy commodity demand,” it said.

In October, haulage equipment failed inside the main shaft of Olympic Dam, which transports 75 percent of the mine’s copper and uranium-bearing ore to the surface. It is under repair and is not expected to be fully operational until the first quarter of 2010, according to BHP Billiton.

Zambia Finance Minister Situmbeko Musokotwane said the main reason behind the decision was that the windfall tax could force some mining companies to shut down, according to Reuters.

“Mining companies required time to recover from losses incurred due to heavy investments in equipment before higher taxation could be enforced,” Musokotwane said.

“Even though copper prices had increased, the government would not reintroduce high mining taxes that it had earlier scrapped as that could hurt the country and investors.

“If we impose tax on revenue on old mines they will end up closing and we don’t want to head in that direction.”

Zambia has been waiving a 25% import tax on imported equipment and 16% value added tax for overseas companies investing in economic zones in order to draw additional investment and generate employment.

The protest, which started before dawn on Wednesday, did not spread to other Codelco [CODEL.UL] deposits, which have either settled contracts or start negotiations next year.

Codelco had expected the open-pit mine to produce 380,000 tonnes of copper this year. The adjacent Mina Sur deposit, which was also blockaded, was expected to bring total production in the area to 565,000 tonnes.

“The blockade was lifted now that the company is willing to sit down and talk to us,” Armando Silva, head of one of three unions jointly negotiating a new collective contract, told Reuters. He added the company dropped its intentions to scrap some contract benefits that sparked the disagreements.

Another union leader, Cecilia Gonzalez, said workers would start their next shift at the mine complex at 5 am (0800 GMT).

A Codelco spokesman was not immediately available for comment on operations or how long it could take the state-run company to make up for lost production.

Codelco is one of the biggest revenue earners for the government, which has used billions of dollars in copper windfall savings to fund stimulus measures to claw out of the first recession in a decade due to the global crisis.

News of the blockage briefly supported sliding copper prices in New York and fanned fears of supply disruption in the world’s top producer of the red metal used to build cars to refrigerators.

The blockade started at 4 a.m. local time (0700 GMT) and had backed up dozens of cars and trucks on the road leading to the mine complex located in Chile’s arid, northern region.

Copper prices fell in London and New York on Wednesday as investors cut exposure to risky assets amid concerns on the health of the economy and a stronger dollar.

Copper for three-months delivery MCU3 on the London Metal Exchange closed at $6,945 a tonne from a close of $6,980 on Tuesday. Copper for March delivery on the New York Mercantile Exchange’s COMEX division HGH0 ended at a three-week low of $3.1235 per lb on rising investor risk fears.

In 2007, a subcontractor workers’ strike at Codelco helped push global copper prices to near record highs of $4 a lb.

Silva said the contract negotiation had collapsed after the company offered to eliminate some benefits by offering more cash instead.

Codelco could still face a potential strike at Chuquicamata if workers reject a future wage offer before the current contract expires on Dec. 31.

COST-CUTTING FAILS?

Experts said the company was aiming at cutting long-term costs with the new contracts to better compete with slimmer, private miners.

Critics say red tape has turned Codelco, which employs 20,000 people, into an inefficient behemoth that is losing market share against other global miners.

Chile’s conservative presidential front-runner, billionaire Sebastian Pinera, tipped to lead Sunday’s vote and win a January run-off, wants to sell up to 20 percent of Codelco to improve company efficiency.

However, the plan is seen as a non-starter due to resistance from Codelco’s powerful unions and an expected divided Congress.

Codelco has launched an ambitious investment plan to increase output at most of its mining divisions in coming years, including an estimated $2 billion project at Chuquicamata. The company is also seen reversing years of dwindling output in 2009 on increased production at aging mines and its star Gaby deposit.

By law, workers cannot strike at the deposit until they have voted on a company wage offer before the current contract expires on Dec. 31.

Copper prices rising by 125 percent in 2009 has emboldened mine workers across the world to demand more of the windfall from mining companies.

Workers at Codelco’s Andina unit reached a wage deal last month for a 3 percent pay hike, plus bonuses and benefits.

After a 42-day strike, workers agreed to a 4 percent pay hike, plus bonuses and benefits, at BHP Billiton’s (BLT.L: Quote) (BHP.AX: Quote) Spence mine.

BHP had an easier time reaching a deal with workers at its Escondida deposit, the world’s largest copper mine.

Xstrata said it would close the Kidd metallurgical operations in Canada next May, though the mine and concentrator would continue to operate.

That suggests the mine’s concentrates, used to feed Kidd’s 125,000 tonnes a year of refined copper production, could be available to other smelters.

Treatment and refining charges (TC/RCs) are fees paid by overseas sellers to Chinese smelters for converting imported concentrates into refined copper, and are deducted from the sale prices, based on London Metal Exchange copper.

Higher TC/RCs arise when supply of concentrate rises or demand falls, which usually cuts the prices of concentrate and could in turn boost refined copper production.

‘The closure will certainly benefit smelters,’ an industry source said.

In October, Chinese smelter officials said top copper producers were seeking TC/RCs of $50 per tonne and 5 cents per pound, respectively, from foreign miners for concentrate shipments in 2010.

Chinese smelters now are looking to receive TC/RCs of around $60 and 6 cents, which will be still 20 percent lower than this year’s $75 and 7.5 cents.

Chinese smelters were worried about a fall in copper prices after prices more than doubled this year, a smelter official said.

‘Cash production costs at global smelters, including Chinese smelters, are over TC/RCs of $55 and 5 cents. We are trying not to make losses, or at least we don’t make big losses,’ he said.

Global miner BHP Billiton has offered TC/RCs of $43 and 4.3 cents to Chinese smelters for 2010. The two sides would hold the second round of the annual talk in the coming week, industry sources said.

Japanese smelters, the world’s second-largest copper concentrate buyer after Chinese, have also indicated their term TC/RC requirements around $60 and 6 cents to overseas miners. Last month, Japanese smelters expected the TC/RCs at $50 and 5 cents in 2010.

BHP has offered term TC/RCs of around $40 and 4 cents to Japanese smelters, the industry sources said.

A senior Japanese official directly involved with the term talks said there was still a price gap of about $20 between Japanese buyers and BHP.

‘There’s still a wide gap in our ideas…and I don’t anticipate an agreement when we meet next week,’ he said.

(Additional reporting by Miho Yoshikawa in TOKYO)

Copper prices slipped below the $7000 mark on Tuesday, taking cues from the stronger dollar and a rise in inventories. Yesterday, copper inventories rose 750 tonnes and may continue to rise as fresh inflows in Korea are rising. China is re-exporting its ample oversupply of the metal in to LME listed Asian warehouses.

On the macroeconomic front, the Dollar Index strengthened on Tuesday as risk aversion in the financial markets led to demand for low-yielding currencies. The currency closed above the 76 mark as investors opted for safer investments. The Dow Jones closed lower by 107 points yesterday and this showed that investors remained wary about the economic recovery. Renewed fears over deteriorating credit ratings in US and UK benefited the Dollar Index as risk aversion loomed in.

Aluminum prices could trade with a positive bias on news that that the global aluminum surplus will narrow by 54% in 2010 from this year in China. The surplus of primary aluminum will narrow to 1.19 million tons from 2.57 million tons. Aluminum prices could trade with a positive bias today.

On the macroeconomic front, the Dollar Index could strengthen and trade with a positive bias as risk aversion could continue to raise demand for the low-yielding dollar. This could put base metal prices under pressure.

Copper
Copper prices are sideways with immediate support for MCX February contract seen at Rs.324.60. Further below, crucial support is seen at 322 levels.

Whereas resistance is seen at Rs.331.40 levels & further upwards at Rs. 335 levels.

Zinc
Zinc prices are sideways with immediate support seen at Rs.106.05 levels for MCX December contract whereas crucial support is seen at Rs.104.65 level. Short-term resistance is seen at Rs.108.90 whereas major resistance is seen at Rs 110.05 levels

“I’m not sure the high copper price is a good thing,” Caleb Fundanga said at a Zambia investment forum in London.

Three-month copper on the London Metal Exchange was trading at $7,110 a tonne on Thursday.

“We are questioning if $7,000 is a sustainable price for copper but $5,000 is a good price,” Fundanga added.

Copper mining is Zambia’s economic mainstay and copper and cobalt producers are a major employer in the southern African country.

At the MCX, copper for delivery in February contract moved down by 0.65 per cent at Rs 328.25 per kg in turnover of 2,958 lots. The metal for delivery in far-month April contract also shed 0.63 per cent to Rs 330.25 per kg in turnover of 142 lots.

Meanwhile, three-month delivery copper at the LME fell 0.07 per cent to USD 7,075 per tonne, while Shanghai’’s copper went down 0.31 per cent to 55,510 yuan per tonne in the morning trade today. Market analysts attributed weakness in metal at the futures market to overnight losses at the LME as weak US services sector data raised concerns over global economic recovery and rise in inventories.

Meanwhile, copper inventories at LME rose by 2,400 tonnes to 445,400 tonnes.

Copper prices fell steep in the final months of 2008 with the December spot price on the London Metal Exchange (LME) at $1.39, as compared with the 2008 peak of $3.94 which was hit in April. But in the first three months of 2009, the LME spot copper price has averaged $1.55.

Bloomberg News reports that LME metals jumped in price in March as some investors bought commodities in anticipation of a rebound in global economic growth. The exchange’s index of copper and five other industrial metals increased 11% in March, the most in 13 months. However, the International Copper Study Group recently announced that copper supply ended 2008 ahead of demand. Refined copper production rose by 3.4% on the year in 2008 to just over 14.7 million metric tons, the ICSG said in its latest report. Copper usage was up 1.9% in the same period to 13.9 million metric tons.

The head of research Nicholas Brook at London-based ETF Securities, who says that prices of copper “have probably found a floor” since several mining companies have cut activity in the past year due to lower prices and reduced access to financing. In a conference call reported by Reuters, Brooks predicts that copper prices in the short term will be underpinned by China, which has announced aggressive infrastructure spending.

However, the buying surge in China may not be here yet, as China’s economy grew by 6.1% in the first quarter, its slowest pace in 10 years. Premier Wen Jiabao says that while China’s economy is in better shape than other nations, “it is still some ways off from a full recovery.”

The commodities team at New York-based J.P. Morgan Securities has written to clients that “the undeniable reality for the copper market is that outside of China, demand remains moribund.” These analysts believe that a lasting recovery in copper’s price still is a long way off but are reluctant to pronounce a bottom because “even with projections of a modest improvement in western world demand in the second half, when stimulus efforts start to take effect, we believe that China’s growth will not be enough to offset the demand destruction seen in the western world.”

Still, the J.P. Morgan analysts do see copper averaging a slightly higher $1.67 in 2010, noting that strong gains are not likely for some time due to high inventories and fairly weak overall demand.

Eleven of 19 analysts, investors and traders surveyed by Bloomberg, or 58 percent, said copper would gain next week. Eight predicted lower prices. The metal for three-month delivery was 3.4 percent higher this week at $7,087 a metric ton at 5 p.m. yesterday on the London Metal Exchange.

Copper, used in electrical gear and construction, rose to a 14-month high of $7,170 a ton on Dec. 2 after reports showed manufacturing increased at the swiftest pace in five years in November in China and rose for a fourth month in the U.S. European service and manufacturing industries expanded at the fastest rate in two years in November, figures showed yesterday.

A purchasing managers’ index released on Dec. 1 by HSBC Holdings Plc for manufacturing in China gained to a seasonally adjusted 55.7 last month from 55.4 in October. In the U.S., the Institute for Supply Management’s manufacturing index came in at 53.6, above the level of 50 that signals an expansion. The countries are the world’s two biggest copper users.

A composite index for European service and manufacturing industries increased to 53.7 from 53 in October, Markit Economics said yesterday.

The weekly copper survey has forecast prices accurately in 32 of the past 66 weeks, or 48 percent of the time.

Stockpiles monitored by the London Metal Exchange tumbled 2.4 percent to 480,400 metric tons. That’s the biggest one-day drop since Oct. 21. Copper prices have surged 57 percent this year on speculation that government spending will revive global growth and spur consumption of raw materials.

“The market has strengthened on the back of the decline in LME copper inventories,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in a report.

Copper futures for July delivery climbed 8.05 cents, or 3.8 percent, to $2.209 a pound on the New York Mercantile Exchange’s Comex division.

The price of copper will continue to climb as demand increases in emerging economies including China, the world’s biggest metals user, said Michael Cuggino, the chief executive officer of Pacific Heights Asset Management LLC.

“What’s happening in copper now is a reflection of the broader global economic story,” said Cuggino, who also helps oversee $3.4 billion as a portfolio manager. “We’re still expecting to see long-term global growth that’s going to drive demand for copper and the other commodities,” he said yesterday in an interview in New York.

Cuggino recommends investors buy shares of Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, as a way to take advantage of higher metals prices. Phoenix-based Freeport rose 81 percent this year before today.

Favoring Freeport

“We like Freeport now,” Cuggino said. “The things that will drive copper, the growth in China and the emerging markets, those things are the same reason to buy Freeport.”

Freeport gained 25 cents to $44.51 at 2:01 p.m. in New York Stock Exchange composite trading.

Still, stagnant U.S. economic growth may limit copper’s gains, said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York.

Industrial production in the world’s largest economy fell 1.5 percent in March, the 14th drop in the past 15 months, as factories trimmed unwanted stockpiles, the Federal Reserve reported today.

“Copper may be able to get as high as $2.25, but after that it is going to meet resistance,” Groenewegen said. “Levels that high do not seem sustainable given the weakness that is still present in the economy.”

Yesterday, copper touched $2.2415 a pound, the highest for a most-active contract since Oct. 20.

On the LME, copper for delivery in three months climbed $120, or 2.6 percent, to $4,819 a ton ($2.19 a pound). The price reached a record $8,940 on July 2.

The shutdown of Escondida, which accounts for 8 per cent of the world’s copper output, pushed up the price of the red metal by $180 per tonne to $7,470 on the London Metal Exchange. Chile’s President, Michelle Bachelet, called for talks to resume between the miner and the unions, who are demanding a substantial pay rise and bonuses to reflect the huge profits earned from high copper prices.

In London, the price of nickel gained $300 per tonne as volumes in LME warehouses dwindled further. China’s largest nickel producer expressed concern that the nickel market was being distorted by speculators and urged the LME to improve regulation.

“The LME is no longer a place for fair dealing metals but a paradise of speculation,” said Li Yongjun, chairman of Jinchuan Group, the largest nickel producer in China.

Nickel reached a record high of $29,200 per tonne in the forward market as stocks plummeted to less than a day’s supply. The premium for cash nickel over three-month delivery widened to almost $5,000 per tonne, prompting the LME to introduce emergency rules on Wednesday to allow short sellers to escape the squeeze.

BHP’s tough stance with the Escondida strikers may be supported by the Chilean Government, reckoned some analysts, as Escondida pays its workforce the highest mining wages in Chile, and the state copper company, Codelco, will be anxious to avoid a high settlement with its own workers. “They won’t want to see BHP set a precedent and stoke higher wage claims at Codelco,” said Robin Bhar, metals strategist at UBS.

BHP said that it had shut the mine for safety reasons but Pedro Marin, a spokesman for the strikers, accused BHP of trying to scare the workforce. “This is illegal pressure,” he said.

December copper was 4 cents lower to $2.96 per pound in New York, while three-month contracts on the LME dropped $40 to $6,530 per tonne on the session.

Inventories were up by 5,775 tonnes during the day to 379,825 tonnes.

Aluminium stockpiles, on the other hand, were down by 2,300 tonnes in LME warehouses, sending that metals prices $4 higher to $1,925 per tonne as some analysts forecast that aluminium inventories are already past their peak and on the way down.

Zinc and lead each saw prices drop by $10, to $2,219 per tonne and $2,350 per tonne respectively, while nickel added $140 to $17,760 per tonne in London.

Meanwhile, among precious metals, December gold added $2 to $1,089.30 per troy ounce and December silver was up a cent to $17.41 per troy ounce, but January platinum dropped $6.40 to $1,362.90 per troy ounce