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Chinese and European rate cuts may bolster copper demand in the longer term, but in the near term they have strengthened the dollar and increased investors’ worries about immediate global economic risks.
Despite rate cuts in China and Europe, copper continued its slide this week as concerns about the global economy’s prospects outweighed hopes that monetary easing would bring increased business spending. A stronger dollar too curbed market appetite for the red metal, and commodities are becoming more expensive for non-greenback traders as a result.
On Thursday, the People’s Bank of China cut its benchmark lending and deposit rates for the second time in a month, increasing speculation that the world’s largest copper consumer is facing even tougher prospects than analysts had expected. The lending rate was cut by 31 basis points to 6 percent, while the deposit rate was reduced by 25 basis points to 3 percent.
In an effort to keep the region’s economy afloat as anxiety about the Eurozone’s sovereign debt crisis continues, the European Central Bank cut its key rate by 25 basis points, bringing it to a record low of 0.75 percent. The Bank of England said it will pump another 50 billion pounds into the economy over the next four months through its quantitative easing program. While these rate cuts and the Bank of England’s quantitative easing are expected to help bolster domestic demand and encourage longer-term growth, investors are currently focusing more on the near-term risks faced by the global economy.
Market players were also rattled by the fact that the US service sector is sluggish. The Institute for Supply Management reported that its non-manufacturing index fell to 52.1 percent in June from 53.7 percent the previous month. Market eyes are now turning to Friday’s release of monthly US jobs data for clues on how the world’s largest economy may lead global growth.
In late afternoon trade Thursday, COMEX copper for September delivery is down 1.4 percent at $3.49 a pound.
Company news
Freeport-McMoRan’s (NYSE:FCX) Indonesian unit is considering an initial public offering that many analysts believe will help the company deal with the new foreign ownership rules introduced by the government this year. However, details of the IPO have not been released.
Action against Newmont Mining’s (NYSE:NEM) Minas Conga mine in Peru turned deadly when at least two people died protesting the project’s potential impact on the local environment. Development of the copper and gold mine was put on hold last year amid concerns that the project may pollute the water supply, but Newmont said it started environmental work to prepare the site for building water reservoirs this week.
Inmet Mining‘s (TSX:IMN) Minera Panama will begin copper mining in 2015 in Panama’s Donoso district. The company estimates that the site will produce 255,000 tons of copper a year through investments reaching $4.3 billion.
The Collahuasi mine in Chile, which is jointly owned by Anglo American (LSE:AAL) and Xstrata (LSE:XTA) as well as several Japanese companies, will be partly powered by solar energy. Spain’s Solarpack won the contract to supply the mine with 60,000 megawatt hours a year from two solar plants beginning in the fourth quarter of next year.
Pala Investments Holdings will acquire 2.5 million common shares of Nevada Copper (TSX:NCU), or over 3 percent of issued and outstanding common shares in the company. Once the deal goes through, Pala will have approximately 38 percent of overall shares in Nevada Copper.
Junior company news
The Oracle Ridge copper mine in Arizona, held by Oracle Mining (OTCQX:OMCCF,TSX:OMN), received a Class II air quality operating permit from the Pima County Department of Environmental Quality. The permit is the first of its kind to be issued by the county in over eleven years. CEO Doug Nicholson stated that “[r]eceipt of the Air Permit for the Oracle Ridge Copper Mine project is a tremendous achievement for Oracle Mining and for our technical and consulting team.”
Vancouver-based Callinex Mines (TSXV:CNX) will begin its exploration campaign in British Columbia and Manitoba. The campaign includes the company’s Sneath Lake and Coles Creek copper projects.
The Copper Kingdom Mining Heritage Center, which celebrates the history of Britain’s copper tradition, is opening this week. Britain’s copper mining history goes back to the Bronze Age, and during the 18th and 19th centuries, the Welsh town of Amlwch was the world’s center for copper mining.
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.
