Copper Breaks Winning Streak, Analysts Unconcerned

“Copper is swimming either side of $7,300, and I don’t think today’s fall is meaningful. Clearly the pace of the rally of late last week was always going to slacken off. I’m not sure the world has changed that much.” Stephen Briggs, analyst with BNP Paribas told Reuters.

Leading up to Thursday’s price drop, copper reached a  ten-week high as positive European growth data gave market players hope that industrial metal demand would be picking up in the short term. On Tuesday, the red metal climbed to $7,354.75 per tonne in London, gaining back roughly half of its losses for the year. Copper prices have closed for the day at $7,310 per tonne or $3.3375 on the Comex.

Short-lived rally

Last week when it seemed as though copper was finally breaking away from the lingering cloud of depressing global economic data, several analysts pipped up to caution that copper’s rally was going to be short-lived. According to some analysts, copper is just taking a slight detour on its way below $3 per pound.

“What’s happened in the last few days is that the U.S. dollar has weakened substantially and we’ve seen some commodities come back because of that, in particular copper, (which) is a big beneficiary (of dollar weakness),” said Andrew Su, CEO at brokerage Compass Global Markets told CNBC on August 9.

Jay Richards, investment manager at GTL Capital Management also echoed Su’s sentiment. “”We expected a little recovery before (copper) slides back to new lows,” he told CNBC.

The pessimistic sentiment surrounding the copper price is not new. Back in May, Copper Investing News reported on a cautionary note to investors from Shanghai Cifco Futures, which outlined the anticipated downward trajectory of copper by the end of September. According to Shanghai Cifco’s technical analysis, investors should brace themselves for a drop that could potentially bottom out at $6,037.50. In it’s analysis, Shanghai Cifco expected that copper could rise in the short term to $7,600, before falling.

Surprise one-day strike at Escondida 

Workers at BHP’s (NYSE:BHP) Escondida copper mine in Chile embarked on a 24 hour strike over demands for an annual bonus and better working conditions.

Marcelo Tapia, the union leader at Escondida told the Associated Press that workers threatened to extend the strike if their demands failed to be met. A meeting will be held on Friday to discuss any further action.

“This could turn into an indefinite stoppage.” Tapia said. According to the Tapia, workers at the mine are expected to work shifts that extend beyond 12 hours.

Rio sacks 1,700 workers

Ongoing disputes with the Mongolia government has led Rio Tinto’s (ASX:RIO) decision to sack up to 1,700 workers at the underground Oyu Tolgoi copper and gold mine. The workers are mostly local.

The disagreements between Rio and the government have been building up for some time, particularly given complaints of over-spending. Both Rio and the government have been unable to come to a conclusion about what share of the profit the government – a 34% partner in Oyu Tolgoi – should receive.

Sam Walsh, chief executive of Rio told the Sydney Morning Herald “We need to work through some difficult issues together, I’m convinced that we are aligned with the government of Mongolia in finding the best way to take the project forward,” he said.

Company news

South American Silver ( TSX:SAC,OTCQX:SOHAF) filed an updated NI 43-101 technical report for the Escalones copper-gold-silver project in Chile this week. The company has significantly increased its copper, gold and molybdenum resources, above the assumed economic 0.25 percent copper equivalent. The project has a indicated resource of 1.9 billion pounds of copper equivalent at a grade of 0.38 percent, as well as an inferred resource of 4.7 billion pounds of copper equivalent at a grade of 0.40 percent.

Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.