Copper Commision Report bullish
Copper nominal price reached on Friday a new historical high of 354,256 ¢/lb., growing by 8% with
respect to last Friday. Stocks registered with metal exchanges closed at 159,630 MT, falling by
2.6% (-4.3 thousand MT), showing current market shortage.
Copper price increase was due to the influence of different factors such as the present stocks
decreasing trend, optimistic reports regarding copper market future issued by some important
market agents such as BHP Billiton, and the US dollar weakness encouraging investors’ entrance
to the market. All occurred during a week in which holidays in China and Japan have moderated
market activity.
News of this week related to supply show the appointment of an arbitrator in the negotiations
between workers and Lomas Bayas (property of Falconbridge), which if no agreement is reached, it
could mean that strike would come into effect next Monday. On the other hand, paralyzation at La
Caridad mine in Mexico –it started last 24 March– continues. Besides, comments of BHP-Billiton’s
marketing director regarding prices will remain high until stocks increase from their current low
levels, strongly impacted as the current market bullish view was reaffirmed by one of the world’s
main copper producers.
Regarding demand information, different economic indicators show good future outlooks. In the US,
the leader indicators of industrial activity, ISM, and the factory orders surpassed market
expectations. On the other hand, the European leading industrial indicator grew with respect to last
month. There exists an historical positive correlation between both indexes and copper demand,
thus allowing anticipating that it would continue as dynamic as scheduled.
Demand dynamism, within a low copper availability context, explains part of spot premiums growth
in Europe, currently averaging US$ 165 per MT, with respect to US$ 135 per MT in April. It must be
considered that premiums correspond to the paid value on copper price and reflect physical market
trends. Besides, concentrates market information is confirming the expected lower availability. The
Germany refinery Norddeutsche Affinerie informed that raw material shortage would last until next
year, thus allowing anticipating strong mid-year negotiations between mining companies and
smelters in defining supply treatment charges. These have already established a strong downtrend
placed in values near 100/10 (and even lower) from 140/14 previously registered in the spot market.
The American currency fell by 0.5% until Thursday with respect to the previous Friday, and
surpassing 1.27 US$/€, at similar values as those of May 2005. A weak dollar has a positive effect
on commodities, which is reflected in the LME metals price index, which as of yesterday grew by
6.9% with respect to the previous Friday, due to strong rises of zinc and copper. Precious metals
were also influenced by the US dollar weakness, closing gold today at 682 US$/ounce (London
Initial) and silver at 14.070 US$/ounce (London Spot), growing by 6.9% and 12.1%, respectively.
Copper price, whose bullish trend has not changed, will continue to be determined by the evolution of the
pending labor issues (Grupo México, Lomas Bayas), as well as by any other new information mainly related
to supply. Besides, the US dollar evolution could continue influencing on commodities’ price.