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Copper on hold in London, watching strike talks

LONDON - Copper futures eased on Wednesday as the market awaited word on resolving a nine-day strike at the world’s largest copper mine, Escondida in Chile, dealers said.

“People expect Escondida to settle soon and are not keen to buy. At the same time, with stocks this low, no one wants to sell either,” a London Metal Exchange (LME) dealer said.

Copper futures on the LME stood at $7,545/7,565 a tonne in midsession dealing, down 1.4 percent from Tuesday’s close of $7,650.

Striking workers and management at Escondida, which produces 8 percent of the world’s copper, said they had made progress towards a deal in talks on Tuesday aimed at ending a nine-day walkout.

Key financial issues would be addressed when talks resumed on Wednesday, a union spokesman said. The strike by more than 2,000 workers has cut the mine’s roughly 3,500 tonnes of daily production by about 60 percent.

“The production losses (at Escondida) could wipe out half the LME inventory very quickly,” ABN AMRO commodity analyst Nick Moore told Reuters, adding that a speedy resolution would prompt some selling.

“We are forecasting that prices will ease as the year progresses. We see prices averaging $7,275 for the second half of the year.”

LME stocks rose a modest 475 tonnes overnight to 113,275 tonnes, just over two days of world use.

Dealers noted that the market appeared unconcerned about availability of copper with the premium for cash metal easing to just $13/18 above the three month price, versus $75 a week ago. The premium, also known backwardation, had shrunk from over $200 in mid-May.

“The backwardation has come in a lot. Perhaps the perception is that stocks are not that tight,” Man Financial analyst Edward Meir said.

Critical nickel

Nickel was higher at $27,700, versus $27,400. In electronic dealing nickel hit a fresh record high of $28,100.

Stocks of nickel in LME warehouses rose a net 354 tonnes to 6,162 on Wednesday after deliveries into Rotterdam and Baltimore totalling 720 tonnes.

But the amount of metal available to the market fell to 1,374 tonnes as cancelled warrants -- metal earmarked for delivery -- rose to 4,788 tonnes from 3,600 on Tuesday.

“If you are short of nickel, the low level stock is a very worrying,” the LME dealer said.

Daily world nickel consumption is around 3,500 tonnes.

“Low inventories are determining prices and the market will be very volatile,” Moore said.

“The premium for cash metal above three months is around $2,000 and that is not attracting enough metal to warehouses.

He said $30,000 was a near-term psychological target, but if metal was not available, prices would have to continue to rise to a point which discouraged consumer buying to bring the market back into balance.

Lead eased $15 to $1,195, but was supported by supply disruptions in Australia. Lead prices have climbed 30 percent since dipping to $928 in mid June. Lead hit a contract high of $1,435 in the first quarter of 2006.

Canada’s Ivernia Inc. said it will take longer than expected to bring its Magellan lead mine to full production as it awaits replacement equipment and BHP Billiton said ore milling at its Cannington lead, zinc and silver mine would be reduced by 20 percent through fiscal 2007.

LME aluminium was down $25 at $2,471.