CHINESE COPPER MAJOR MARKET DEVELOPMENTS IN JULY

SteelGuru
Tuesday, 11 Aug 2009

Reuters reported that falling Chinese copper imports may be enough
to trigger a fall in prices in August but the metal’s medium term
outlook still looks bright. But some are concerned that such high
prices in an economic recession threaten future demand.

Chinese copper purchases, mainly for stockpiling have been a major
factor behind rising prices this year.

Mr David Thurtell analyst of Citigroup said that "Copper’s our favorite
metal in the medium term but it’s done a lot and could be vulnerable to
falling Chinese imports. Copper prices could reach USD 7,500 per tonne
in the H2 of 2010, providing there was synchronized economic growth
in the West, strong growth in China and supplies remained constrained."

Another analyst was also concerned that such high prices would
accelerate the substitution threat, with consumers turning to
aluminium. Aluminium is around one third of the price of copper and
a ratio of 3:1 is considered a pinch point for substitution. She said
that "People will be reluctant to buy any more than they need at USD
6,000. It’s already choking off potential demand."

Mr Angus Macmillan Independent consultant said that prices could pull
back to around USD 5,000 per tonne in the next few weeks. He said
that consumption was weak at the moment but if it picked up again
early 2008 supply would struggle to keep up.

Below are some of the more significant recent developments in
production, stocks and prices that may influence the direction of
the market in 2009.

July 31 – The International Copper Study Group said that world
copper mine production rose 21% between 1999 and 2008 to 15.5 million
tonnes. China and India’s annual refined production more than tripled
over the full 10 year period, increasing by 2.6 million tonnes to 3.8
million tonnes and by 470,000 tonnes to 675,000 tonnes, respectively.

July 30 – The National Statistics Institute said that Chile produced
467,185 tonnes of the metal in June down 2.6% from the same month 2008.

July 29 – Chile government state copper think tank, Cochilco, left
unchanged its forecast for Chile’s copper output at 5.4 million
tonnes this year. It also kept unchanged its 2010 forecast at 5.75
million tonnes.

July 27 – The union representing striking worker at Vale’s Canadian
operations is not in talks with the company and expects a prolonged
shutdown at the nickel and copper operations. The company’s operations
in Sudbury, Ontario have been idled since June due to weak nickel
demand. They had been due to restart on July 27th but are remaining
shut as unionized workers declared a strike after rejecting the
company’s 3 year contract offer.

July 27 – Demand from China and Taiwan and rising world prices have
prompted German metals group Cronimet to resume expansion of its
molybdenum and copper mine in Armenia. It had suspended an expansion
program to raise output at the Zangezur Copper and Molybdenum Combine
to around 14 million tonnes of molybdenum and copper concentrate in
2011 from about 12 million tonnes in 2008.

July 27 – China Nonferrous Metal Mining Corporation plans to start
building its Mulyashi copper mine in Zambia in January 2010.

July 27 – Chile’s Collahuasi copper mine said it estimates losses of
around 20,000 tonnes of fine copper or 5% of its annual output after
power problems. The mine said that repairs to the damaged control
room that powers its main conveyor belt will take the next 2 months.

July 24 – Zambia approved First Quantum Minerals’ plan to open the
new Fishtie copper mine in central Zambia to provide feedstock for
its suspended Bwana Mkubwa processing plant.

July 23 – Peru’s mining ministry said that Doe Run Peru is not doing
enough to avert collapse and present a viable rescue plan to the
government and creditors. Doe Run owns the La Oroya polymetallic
smelter, which has been totally paralyzed since June after banks
worried about falling metals prices severed its credit lines.

July 23 – Newmont Mining Corporation’s said that it may slow mining
activity later this year and halt it completely in 2010 if it doesn’t
obtain an essential land use permit.

July 22 – China’s Zhonghui Mining Group plans to invest about USD
3.6 billion in copper exploration and mining in Zambia, reflecting
growing Chinese interest in the country’s mineral wealth.

July 22 – Escondida, the world’s biggest copper mine in Chile is
shutting a key milling operation for 45 days for repairs after
equipment problems contributed to a 38% decline in mine production
2008 for 57.5% owner BHP Billiton.

July 21 – KGHM said that it will spend less than the planned PLN 900
million to buy new deposits outside Poland.

July 20 – The ICSG said that world refined copper consumption exceeded
production by 37,000 tonnes between January and April this year,
versus a deficit of 147,000 tonnes in the same year ago period.

July 20 – Zambia’s Luanshya Copper Mines has reemployed more than
500 workers for the reopening of the Baluba copper mine, which closed
last December due to losses caused by low global metals prices.

July 17 – China produced 1,950,500 tonnes of refined copper in the
H1 of the year up 3.9% from the same period of 2008. Output of mined
copper rose by 9.6% over the same period to reach 467,000 tonnes.

July 10 – Labour talks at the Antamina copper-zinc mine in Peru are
under way and so far amicable. The company and union are negotiating
a new contract to replace a 3 year agreement that is set to expire
July 24th. If necessary both have said that they would be willing to
work past the deadline to reach a deal.

July 7 – Mine owner Minerals and Metals Group said that a grinding mill
at Australia’s Golden Grove copper zinc operation is now back on line
after being shut down early in June due to technical problems. The
company, owned by China’s Minmetals, said that the semi autogenous
grinding mill had now been fixed and was ramping back up to full
capacity.

Copper prices continued to make substantial gains in July, ending
the month at USD 5,748 per tonne up almost 16% from USD 4,970 per
month earlier.

Concerns for slowing demand growth prospects caused prices to weaken
early in July but they took off again around mid month as risk
appetite increased.

Prices continued their upwards path into early August and reached
USD 6,235 per tonne and their highest since early October 2008. But
consumption worries resurfaced and the market has since retreated
below USD 6,000 with investors cautious ahead of latest US payroll
data due out later on August 7th 2009.

In July, the twice yearly Reuters base metals price poll put the
median average for the LME cash copper price at USD 4,318 per tonne
up from the January forecast of USD 3,417.50 per tonne.

From: Emil Lazarian | Ararat NewsPress