Base Metals

Copper has nudged back up from a near five-month low, but many traders are wary of moving aggressively in light of political and economic instability in Greece. Still, for some, now may be a good time to shore up the red metal at a reasonable price.

Copper May Be Hot Amid European Doldrums

Copper is gaining ground on bargain hunting after falling to a near five-month low this week. While Europe’s ongoing struggle with the sovereign debt crisis was never far from investors’ minds this week, the copper market took its cues from the bourses, shaking off a slew of negative news from Europe and China, at least for now.

Looking ahead, the next few weeks of anxiety as Greece gears up for another election next month may be precisely the time to snap up bargains. While the government established after the June 17 election may push Athens to exit the Eurozone, European leaders agreed in Brussels this week on a contingency plan for that scenario, which should give base metals support.

“All the contingency plans (for Greece) come back to the same thing: to be responsible as a government is to foresee even what you hope to avoid,” said Belgium’s finance minister, Steven Vanackere, according to Reuters.

Another worry for copper investors is the continued decline of China’s manufacturing sector. HSBC’s Flash China Manufacturing Purchasing Managers’ Index for May fell to 48.7 from 49.3 the previous month. Still, HSBC’s chief economist for China, Hongbin Qu, said Chinese leaders are unlikely to simply sit back and watch the economy fall further, stating that Beijing policy makers will continue stepping up easing efforts to stabilize growth, “as indicated by a slew of measures to boost liquidity, public housing and infrastructure investment and consumption. As long as the easing measures filter through, China will secure a soft landing in the coming quarters.”

In late afternoon trade Thursday, COMEX copper for July delivery is up 0.7 percent at $3.42 a pound.

South Africa’s Standard Bank said that its view on base metals, including copper, “remains unchanged: upside remains capped and should remain capped for most of this year.”

Meanwhile, investors should keep a careful eye on the latest dispute between copper traders and securities regulators. Vandenberg & Feliu, a law firm representing copper traders, said in a letter to the US Securities and Exchange Commission that JPMorgan Chase’s plan to introduce an exchange-traded fund linked to copper will be disruptive to the red metal market.

“If approved, the NYSE will permit the JPM XF Physical Copper Trust to sell shares of an ETF backed by physical copper that must meet the LME requirements for copper available for immediate delivery. The copper backing this ETF will be removed from the market. For the most part, the only such copper available to satisfy the ETF’s requirements is copper in LME warehouses,” the law firm stated.

Company news

Codelco reported a 10 percent fall in first quarter copper output, producing a total of 373,000 tonnes. The Chilean state-owned company, which is the world’s biggest copper producer, said profits before tax and extraordinary items reached $1.445 billion, marking a 38 percent decline from the same period a year ago. Codelco stated, however, that it expects to reach its target to produce 1.708 million tonnes of copper for the full year, and CEO Diego Hernandez said he expects copper prices to remain relatively stable.

Herbert Wirth, KGHM’s (OTC Pink:KGHPF) CEO, said the European copper group will refrain from buying overseas assets until 2014, and will instead focus on developing Quadra FNX Mining, which it acquired in February.

“For now one can say that analysts forecasts, according to which Quadra could show net earnings of 500-600 million zlotys this year, are to my knowledge too low,” Wirth told the news agency in an interview.

Meanwhile, Xstrata (LSE:XTA) expects greater Chinese copper demand in the latter half of this year. The company’s copper division head, Charlie Sartain, said at a mining conference in Sydney this week that Xstrata will press ahead with its $7 billion capital expenditure plans to develop mines in Australia, China, Peru, and Argentina. In addition, he argued that the ongoing financial crisis in Europe will not have a significant impact on the global copper market.

Junior company news

International PBX Ventures (TSXV:PBX) signed a joint venture option agreement with OZ Exploration Chile, a wholly-owned subsidiary of Australia’s OZ Minerals (ASX:OZL) regarding PBX’s Copaquire copper and molybdenum propery in Northern Chile. Under the agreement, OZ Minerals will earn a 90 percent interest in Copaquire by making cash payments of $90 million and drilling up to 30,000 meters.

Vancouver-based West Cirque Resources (TSXV:SIG) fully acquired two more mineral claims adjacent to its Four Mile copper project in Northwest British Colombia. The property now totals 2,203 hectares.

Explor Resources (OTCQX:EXSFF) and Fortune Minerals (OTCQX:FTMDF) joined the OTCQX International market this week.


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





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