Base Metals

More signs of economic strength in the United States are buoying demand for copper worldwide. Still, downside risks remain, including a rise in energy costs pushing down demand.

By Shihoko Goto — Exclusive to Copper Investing News

US Jobs, Auto Sales Bolster Copper, but Risks Remain

With more signs of upward momentum in the US economy and a steady rise in Chinese manufacturing, demand for copper worldwide is rising. 

A rise in car sales is also lifting spirits, as February auto sales in the US reached the highest level in nearly four years despite higher energy prices. General Motors, Ford, Chrysler, and Nissan all beat analysts’ expectations in the latest month.

In February, China, the world’s biggest copper-consuming nation, posted its strongest reading since last summer. The China Federation of Logistics and Purchasing reported that its Purchasing Managers’ Index rose to 51.0, up 0.5 points from January. This is the third consecutive month that it has risen.

In late afternoon trade Thursday, COMEX copper is trading up 1.3 percent at $3.92 a pound.

Cautious optimism 

Weekly US jobless claims fell to a four-year low, down 2,000 to a seasonally adjusted 351,000, according to the Labor Department Thursday. Federal Reserve Chairman Ben Bernanke warned lawmakers Wednesday that the job market remains “far from normal.”

In his semi-annual report to Congress on the state of the US economy, delivered Wednesday, Bernanke also cautioned that risks posed by the surge in energy prices will likely dent consumer spending.

The Tempe, Arizona-based Institute for Supply Management reported that its factory index fell to 52.4 in February from 54.1 in January. Consumer spending in the US was flat when adjusted for inflation, according to the Commerce Department.

SEB Commodity Research is bearish on industrial metals in the near-term, but is more upbeat about longer-term demand.

“While positive signals dominate at present, it would be unrealistic not to anticipate at least temporary setbacks to affect one or several of these issues before growth expectations finally stabilize,” SEB said. “We do not expect this to happen before the second half of this year and therefore continue to recommend a cautious short-term approach to the sector. Investors should aim to sell on rallies and buy on dips. Our long-term expectations remain bullish, though the ride is likely to remain bumpy in the short to medium term.”

Company news

Industry giant Freeport-McMoRan (NYSE:FCX) said that shooting incidents at its Grasberg mine in Indonesia have affected operations. Since July 2009, 15 people have been killed and 56 people injured. Victims include not just Freeport-McMoRan employees, but also contractors and civilians.

Still, “the identity of the perpetrators is unknown as is the motivation for the shootings,” Freeport-McMoRan stated. “We have taken precautionary measures, including using secured convoys on the road. The Indonesian government has responded with additional security forces.”

Ivanhoe Mines (NYSE:IVN) said that its Oyu Tologoi copper and gold mine in Mongolia is on track to meet its initial production plan to begin output by the third quarter of this year.

“Installation of the two production lines in the concentrator and pre-commissioning works are progressing ahead of plan. The concentrator, which will have an initial capacity of 100,000 tonnes per day, now is more than 80 percent complete. The first production line is scheduled to be completed during the third quarter, followed by completion of the second production line in the fourth quarter this year,” stated CEO Robert Friedland. Oyu Tolgoi is expected to be one of the top five copper mines in the world, as it is projected to produce over 544,000 tonnes of copper a year over the next decade.

Kazakhstan’s largest copper producer, Kazakhmys (LSE:KAZ), reported that sales rose to $3.6 billion in 2011, nearly ten percent from the previous year. It raised its full-year dividend to 28 cents from 27 cents a share, and sold copper at an average of $8,756 a ton in 2011, up 16 percent from its 2010 price. Kazakhmys expects to increase its red metal output to 500,000 metric tonnes per annum within the next five years, from around 300,000 tonnes planned for this year.

Meanwhile, Copper Mountain Mining (TSX:CUM) will be featured by Business Television Network on March 3 and 4. The program will be broadcast in Canada on BNN and Fox Business News, and among other networks in the US. CEO Jim O’Rourke will be discussing the company’s copper project near Princeton, British Columbia as part of a program that focuses on emerging publicly traded companies.

Junior company news

Copper Fox Metals (TSXV:CUU) reported a net loss of $692,576 for the fourth quarter, and a loss of $3.88 million for the year ended October 31, 2011. During the year, the Vancouver-based company acquired additional mineral tenures around the Schaft Creek project and purchased shares in Liard Copper Mines.

Copper North Mining (TSXV:COL) said its proposed Carmacks copper mine in the Yukon, Canada will produce about 32 million pounds of cathode copper a year at a cash cost of around 84 cents a pound. Its latest feasibility study will be completed by the end of the second quarter.


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









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