Copper Prices Edge Higher on Supply Concerns from Key Producers

Strategic Insights -

Copper prices experienced a minor increase as investors voiced concerns over supply disruptions at Chile's El Teniente mine and the potential impact of resource nationalism in Peru under a new government. The July delivery contract on the Comex division of the New York Mercantile Exchange saw a 0.5% increase, reaching $4.1530 a pound, while June delivery copper rose 0.2% to $4.1400 a pound. The state-owned Corporacion Nacional del Cobre de Chile, or Codelco, continued to operate El Teniente at 40% capacity after protests by contract workers escalated. Meanwhile, Peru's newly elected President Ollanta Humala's call for greater resource nationalism sparked concerns among investors and caused mining stocks to plummet.

Key Takeaways:

  • Copper prices rose 0.5% and 0.2% for July and June delivery contracts, respectively, on the Comex division of the New York Mercantile Exchange, despite a slight decrease in supply from Chile's El Teniente mine.
  • Corporacion Nacional del Cobre de Chile, or Codelco, continues to operate El Teniente mine at 40% capacity after protests by contract workers escalated last week, with the strike now in its second week.
  • Analysts at Commerzbank highlighted the increasing violence and strength of the strike at El Teniente, citing incidents of violence and impact on operations.
  • Peru's newly elected President Ollanta Humala's call for greater resource nationalism has heightened fears among investors and caused a sharp decline in mining stocks, with Standard Bank base metals analyst Leon Westgate noting an apparent softening of Humala's stance had done little to alleviate concerns.
  • China's copper trading hub, the Shanghai Futures Exchange, was closed Monday for the Dragon Boast Festival holiday, potentially contributing to copper price fluctuations.

Statistics:

  • Copper prices for July delivery rose 0.5% to $4.1530 a pound on the Comex division of the New York Mercantile Exchange.
  • June delivery copper prices increased 0.2% to $4.1400 a pound.
  • Corporacion Nacional del Cobre de Chile, or Codelco, operates El Teniente mine at 40% capacity after disruptions from contract worker protests.
  • El Teniente mine produces about 400,000 metric tons of copper a year.
  • Peru is the world's second-largest producer of copper and largest producer of silver.

Sources:

  • Dow Jones Commodities News via Comtex (Jun 06, 2011)
  • Standard Bank base metals analyst Leon Westgate (note to clients, Jun 06, 2011)
  • Commerzbank analysts (Jun 06, 2011)