Supply issues are boosting copper prices
Labor strife in South America may spur further price increases
Tom Stundza -- Purchasing, 11/20/2009 9:34:11 AM
Copper prices have been trading above $3/lb this week and are expected to stay elevated next week because of potential threats to supply stemming from labor talks in South America. So say 11 of 17 analysts, investors and traders surveyed by Bloomberg. They say the copper prices on the London Metal Exchange (LME) will be higher next week than the $3.07/lb average for this week.
"Upward price momentum is strong," says analyst Gayle Berry at Barclays Capital in London. "Increasing tensions in Latin American labor negotiations add further upside risk to prices." Workers may strike soon at Minera Antamina, the Lima-based operator of the world's largest combined copper and zinc mine. Atop that, BHP Billiton, the world's biggest mining company, is evacuating its Spence copper mine in Chile after worker sabotage during a 38-day strike over pay.
As has been reported, volatility hasplagues the copper market all year. Copper prices have more than doubled this year, even as inventories in warehouses monitored by the LME have swelled by 24% to 420,550 metric tons yesterday. Bloomberg says copper inventories now have increased for 13 straight days and are heading today to a 19th weekly gain.
Barclays Capital, in general, is bullish on copper prices and other traded commodities. The bank says commodities will likely attract a record $60 billion this year as investors continue to diversify their assets. Inflows so far this year into commodities are almost $55 billion, more than the previous record of $51 billion set in 2006, the bank said. Total commodity assets under management will probably expand to $230 billion to $240 billion by the end of the year.
Still, not all analysts are convinced copper will rise again next week: Five of those surveyed by Bloomberg predicted lower prices and one expected little change. Analyst Edward Meir at MF Global in New York points out that the commodity bears are somewhat wary about the fact that "the recent batch of U.S. macroeconomic numbers have been coming in on the weaker side."
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