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Copper prices climbed over $9,500 per tonne for the first time in two-months Monday, as supply concerns ushered investors back into the copper market.
By Leia Michele Toovey-Exclusive to Copper Investing News
The regroup was welcome relief for the copper market, which has been battered over the recent weeks as fears over potential insolvency in debt laden Greece steered investors into the safe-haven assets such as gold, and away from the “riskier” commodities such as copper. The lifting of the Greek debt concerns, as Greece’s parliament approved an austerity plan encouraged investors to re-enter the copper market, particularly on bargain hunting, however, supply threats in an already tight-supply chain also contributed to the metal’s upward impetus.
Copper prices have staggered since reaching record-highs in February, however, after the recent recovery, they are a mere six percent off their previous high. Analysts maintain a bullish stance on the near-term state of the copper market, claiming that after the seasonally low demand period wraps up, the metal will once again be off to the races. With shrinking supplies still buoying the market, many still believe that the red metal will touch a new record price this year.
The copper market has been hit with a number of supply threats over the past few days. Chile’ state owned Codelco is working to avert a 24-hour strike by workers demanding a bigger say in the restructuring of the world’s top copper miner. Codelco union leaders called for a walkout on July 11 that would halt operations at all six mines controlled by the company. Meanwhile, Codelco is still dealing with a protest by contract workers that has cost the miner at least $100 million in lost revenue from its No. 2 operation El Teniente. Also, overnight in top-copper producing country Chile, heavy snow and winds severely affected output at Chile’s Collahuasi mine, according to the head of the company’s main union.
On Monday, workers at Freeport McMoran Copper & Gold Inc.’s (NYSE:FCX) Indonesian unit went on strike. The group is asking for a pay raise as well as for the reinstatement of its leaders who were expected to be fired. According to union workers at Freeport’s Grasberg mine, protests are already curtailing output, however, according to Freeport Indonesia, concentrate shipments have not been disrupted. Freeport declined to provide further insight into current disruptions to the mine’s operation. The company has cautioned union leaders that the strike over pay is illegal.
Copper’s recovery is still being underpinned by concerns over the state of China’s economy and its future demand for the metal. On Monday, after an initial uptick, Shanghai copper was under pressure throughout the session as investors rushed to book profits amid renewed concerns over further monetary tightening, after the People’s Bank of China issued a statement Monday that “inflation pressures are still high.” The statement led to speculation that another increase in interest rates could be announced at any time.
The sentiment over China’s demand spread over into the markets on Tuesday. In early morning trading, the optimistic sentiment surrounding the copper market soured, with LME copper declining 0.4 percent to touch $9,414.50 a tonne by 0718 GMT. Adding further downside pressure was a warning by Standard and Poor’s that it would treat a French bank plan to rollover privately-held Greek debt as a default. Sentiment did, once again, reverse and copper closed on Tuesday just shy of Monday’s high.
July and August are seasonally-low demand periods for copper, but prices are still being supported by low inventories. Copper inventories tracked by the London Metal Exchange, as of July 4th were 462,725 tonnes, the lowest in more than two months. Reports out of China indicate that stockpiles have plummeted 50 percent in the past two months.