Copper’s Price Indicates Economic Growth

By Leia Michele Toovey- Exclusive to Copper Investing News
According to Copper, the Bull is Back

Surprisingly upbeat economic data out of the U.S. boosted copper to its highest price since the Lehman bankruptcy. On Friday, the U.S. Labour Department announced that nonfarm payrolls rose by 162,000 in March while the unemployment rate held steady at 9.7 percent. The COMEX was closed Friday, so the optimistic data permeated the markets on Monday.

Copper hit a 20-month peak of $3.64 per lb on Tuesday, and led many other base metals to highs. Adding impetus to the good economic news, stockpiles around the world hit new lows. Copper has only breached the key $8,000 a tonne level during phases of strong economic growth.  Historically, the metal has traded in this realm during the first half of 2008 and brief periods in 2006 and 2007. It hit an all-time high of $8,940 a tonne in July 2008.

Chile’s central bank announced on Tuesday that it sees copper prices increasing by 15 percent throughout 2010. The bank raised the average price forecast for this year to $3.10 per lb from the previous $2.70 per lb. That’s behind current prices, which hit $3.64 per lb on Tuesday.  The bank expects a slight retreat in copper prices next year; it forecast copper prices at $2.90 a lb in 2011.

In the meantime, the country is confronted with the fiscal challenge of rebuilding after the February quake. Chile is in the midst of determining how to allocate funds to repair nearly $30 billion in damage across southern Chile after the 8.8 magnitude earthquake. This financial undertaking will likely delay plans to expand output at Codelco, the world’s largest copper producer.  Chile is faced with the task of revising more than $10 billion of projects to expand output at Codelco. The government will look at “creative” ways of raising cash for good projects, and will focus on bringing the most profitable projects into operation first. Codelco has written a petition to the government, claiming that the funds are necessary to maintain the company’s production levels. Codelco is expanding its Andina, El Teniente and Radomiro Tomic copper mines.

Company News

Pan Pacific Copper Co. (US:PPFP), Japan’s largest producer of the metal, plans to cut refined-copper output by 1.6 percent in the first half of this fiscal year compared with a year earlier. Output will drop to 291,600 metric tonnes in the six months ending Sept. 30 from 296,300 tonnes in the previous year. The company did not state why it has chosen to drop copper output despite rising prices.

Zambia’s largest copper producer, Vedanta Resources Plc’s (LSE: VED), Konokola Copper Mines, will start processing copper over the next few weeks. The Konkola Deep Mining Project was commissioned last week.  Now, over the next 15 days Konokola will start to deliver the raw materials from the mine to its concentrator. The KDMP will help boost total copper production to 500,000 tonnes next year from around 300,000 tonnes in 2010 and will extend the mine’s life by 23 years. Together with other expansion projects the company has invested $1.6 billion dollars.

Antofagasta (LSE: ANTO) expects to meet copper output targets for this year even after an earthquake in Chile delayed the $3.3 billion expansion of its Los Pelambres mine.  The earthquake delayed the Los Pelambres expansion by six weeks, however, Antofagasta remains on target to boost copper output to a record level. Los Pelambres is the company’s biggest mine. Also in the works for Antofagasta is a new mine, the company’s fourth.  The new mine will be located in Chile’s Atacama Desert. Antofagasta, which will mine about a 10th of Chile’s copper this year, plans to produce 534,000 metric tonnes in 2010, up 21 percent from last year. Output will rise to 700,000 metric tonnes by 2011.

With help from  Assistant Editor Vivien Diniz