Weaker Dollar Boosts Copper and Crude Oil Futures as Labor Strike Continues in Chile's Escondida Mine

Strategic Insights -

The weakening dollar and an ongoing labor strike at the world's largest copper mine have contributed to a boost in copper and crude oil futures, with copper reaching its highest levels since early April. The price of copper for September delivery settled at $4.4780 a pound, a 1.6% increase from the previous day, while crude oil futures touched one-month highs above $100 a barrel. The strike at Chile's Escondida mine, majority controlled by BHP Billiton Ltd., has led to concerns about copper supply, with the mine standing to lose 3,000 tons of copper output per day.

Key Takeaways:

  • Copper futures reached their highest levels since early April, with a 1.6% increase in price to $4.4780 a pound.
  • The weakening dollar has contributed to the boost in copper and crude oil futures, making dollar-denominated copper cheaper for buyers using other currencies.
  • The ongoing labor strike at the Escondida mine, which is majority controlled by BHP Billiton Ltd., has led to concerns about copper supply, with the mine standing to lose 3,000 tons of copper output per day.
  • The strike has also led to a boost in crude oil futures, with prices touching one-month highs above $100 a barrel.
  • The Treasury Department has warned that Congress must vote to raise the US debt ceiling by August 2, or the US government may face a downgrade or temporary default, which has contributed to the weakening dollar.
  • Matt Zeman, head of trading with Kingsview Financial, stated that copper is "probably near the top of its range here" and that futures have climbed to within striking distance of February's record highs above $4.60 a pound.
  • Standard Bank analyst Leon Westgate noted that copper prices have been supported by the widely held view that mine-production growth would fail to keep up with rising demand, and weather- and labor-related supply shortfalls in Chile have brightened sentiment among copper traders.

Statistics:

  • Copper futures price: $4.4780 a pound
  • Increase in copper price: 1.6%
  • Crude oil futures price: above $100 a barrel
  • Amount of copper output lost per day at the Escondida mine: 3,000 tons
  • Percentage of global supply accounted for by Chile: 30%

Sources:

  • Dow Jones Commodities News via Comtex, "Weaker dollar boosts industrial bellwethers copper, crude oil" (July 26, 2011)
  • Matt Zeman, head of trading with Kingsview Financial, as quoted in Dow Jones Commodities News via Comtex (July 26, 2011)
  • Leon Westgate, Standard Bank analyst, as quoted in Dow Jones Commodities News via Comtex (July 26, 2011)
  • BHP Billiton Ltd. (BHP, BHP.AU), as cited in Dow Jones Commodities News via Comtex (July 26, 2011)