Copper Climbs as Supply Concerns Mount

By Katherine Dunn 

LONDON--Copper prices edged to a fresh 20-month high on Monday, as a strike at the world's largest copper mine and the threat of supply disruptions at an Indonesia mine stoked supply worries.

The three-month London Metal Exchange contract rose 0.10% to $6,097 per metric ton in midmorning trade, its highest point since late May 2015.

"In the near term, copper prices should continue to trade on headlines from Escondida as well as from the large Grasberg mine in Indonesia, which is also at risk of production disruptions if an export permit is not granted by the government in the coming weeks," J.P. Morgan said in a morning note.

The supply concerns were outweighing a slightly stronger dollar as gains across the metals sector led rises in markets in Australia and Europe. The WSJ Dollar Index was up 0.09% on Monday.

Last week, talks between management and workers at the Escondida mine in the Atacama Desert of northern Chile broke down, and workers have been striking since Thursday. On Friday, BHP Billiton Ltd., the majority-owner of the mine, said it would not be able to fulfill contracts for copper deliveries or shipments as a result of the strike, according to a spokesman.

Traders are also closely watching for news at Freeport-McMoRan Inc.'s Grasberg mine in Indonesia. The company has said that it will make cuts to output if it doesn't receive an export license from the government by midmonth.

On Friday, prices briefly dipped on reports that the government had offered Freeport a special export license, before rallying after the company said there was still no agreement.

"The labor disputes in Indonesia and [Latin America] are no closer to a resolution with both sides seemingly resigned to a potentially prolonged period of disruption, whilst this state persists every fresh high will likely bring fresh money in," Matt France, an analyst at Marex Spectron, said in a morning note.

Analysts estimate the two mines combined produce around 10% of the world's copper supply.

But if the export disagreement is resolved, that could pave the way for exports of copper concentrate to be resumed, Commerzbank said. Those exports have been paused since Jan. 12.

The gains appear to be largely speculative, the German lender said. But other analysts think the market still has further to climb.

"We think markets have yet to price in longer-than-expected supply shocks and better-than-expected economic fundamentals in China," Argonaut Securities said in a report. China is the world's top consumer of the metal.

The other base metals were mostly higher on Monday. Lead was up 1.71% at $2,443 a metric ton, zinc was up 0.89% at $2,952 per ton, nickel was up 0.89% at $10,745 per ton and tin was up 1.75% at $19,756 per ton. Aluminum was down 0.13% at $1,873.50 a metric ton.

Riva Gold and Biman Mukherji contributed to this article.

Write to Katherine Dunn at [e-mail]

(END) Dow Jones Newswires

February 13, 2017 06:21 ET (11:21 GMT)

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