Copper Prices Rally on QE2 Expectations

By Leia Michele Toovey- Exclusive to Copper Investing News

Copper settled at a 27-month high Tuesday, buoyed by expectations that the Federal Open Market Committee will approve a second round or quantitative easing. The FOMC is currently in meetings, and is widely anticipated that on Wednesday, they will announce a Treasury-purchasing program worth around $500 billion.  This “QE 2” is expected to stimulate growth and expand money supply to the sluggish American economy. QE 2 could prove especially beneficial for copper prices; some investors believe the program will raise copper demand by improving construction and manufacturing sectors, which are key end users of the red metal.

Copper prices were given extra impetus from a weak dollar, which retreated 1 percent relative the Euro on Tuesday. On the COMEX, The most actively traded contract, for December delivery, settled up 1.4 percent, at $3.8390 per pound.

On Wednesday, the results of the U.S. elections will be reported; the midterm elections are expected to cause a shift in power, moving from a democratic to republican house.  In the near term, many analysts claim that a republican house will be better for the economy due to an aggressive debt-slashing program that the republicans have proclaimed they will embark upon.

China’s appetite for copper shows no sign of slowing down. China’s copper demand may climb to 8.5 million tonnes in 2015 from 7.5 million tons last year, Zhang Fengkui, head of the non-ferrous metals office at the Ministry of Industry and Information Technology’s raw-materials department, said at a conference. At the same time, rising labour costs have analysts predicting that the Asian country will import proportionally more of the high-grade copper scrap.

In order to keep operating costs in check, Chinese companies will avoid skyrocketing domestic labour costs by importing higher grade copper stocks.  So far this year, the metal content in imports has climbed to 39 percent from 18 percent to 20 percent copper before 2008. The copper contained in scrap imports totaled 1.1 million metric tonnes in January to August, The figure for 2009 was 1.2 million tonnes, she said. Rising labor cost means it’s no longer profitable to import scrap which only contains a 10 percent to 20 percent copper.

Copper inventories at London Metal Exchange-approved warehouses fell 625 metric tonnes Tuesday, to a total of 366,950 metric tons. Comex copper stocks on Monday afternoon, the most recent available data, were unchanged at 75,100 tonnes.

With already tight fundamentals, copper industry experts are sounding the alarm on possible metal shortages in the following years. Copper supply has been limited and the financial crisis has delayed mine development, with projects representing more than 9 million tonnes of concentrate struggling to find funding, according to the International Copper Study Group. Global copper-concentrate output capacity will expand by less than 2.5 million tonnes between 2010 and 2013.

Company News

Newmont Mining Corp., (NYSE:NEM) on Tuesday, reported a 38 percent increase in third-quarter profit. For the three months ended Sept. 30, Newmont said net income rose to $537 million or $1.07 a share, up from $388 million, or 79 cents, earned in the year-earlier third quarter. Revenue for the quarter rose 27 percent to $2.6 billion, a record high for Newmont, from $2.05 billion a year ago. The gains were a result of the surge of metal’s prices, including copper and gold. Last quarter, Newmont fetched an average $1,221 an ounce for its gold, while copper commanded a price of $3.67 a pound. The company’s operating margin for gold widened to 61 percent or $744 an ounce, from $58 percent, or $560 an ounce, a year earlier.

Nevada Copper Corp. (TSX:NCU) is very pleased to announce it will proceed directly to completion of a Definitive Feasibility Study at its 100 percent owned Pumpkin Hollow copper project located in Nevada. This decision is based on the success of the delineation drilling program and the substantial progress made in feasibility-related engineering studies. This move is expected to speed up the project development timeline.

Candente Copper Corp. (TSX:DNT) has obtained an updated Mineral Resource Estimate for the Canariaco Norte copper deposit in Peru. This updated estimate, completed by AMEC Americas has re-modeled and re-classified the Mineral Resource and issued an updated, significantly larger Resource Estimate. Highlights include: at the base case 0.30 percent copper cut-off grade, Canariaco Norte’s Measured and Indicated tonnage has increased by 21 percent and the Measured and Indicated contained copper has increased by 16 percent from the Mineral Resource Estimate released in September 2008. A 0.20 percent copper cut-off grade was also modeled. Using this cut-off grade, Canariaco Norte’s Measured and Indicated tonnage increased by 22 percent and contained copper increased by 18 percent from the 2008 Mineral Resource Estimate.