Cathode producers such as Kennecott Utah Copper now say copper premiums for the third quarter will remain unchanged at the second quarter average of 3.5¢/lb above Commodity Exchange (Comex) futures on the New York Mercantile Exchange. That's good news for price-conscious copper buyers. The news is made even better by the fact that Comex futures appear to be stuck at an average 76¢/lb.

Comex cathode bottomed last October at 64¢ and rose gradually to 75¢ in March. Spot and futures prices have stuck at about that level—a full nickel under earlier forecasts—because of global copper oversupply, a lack of buyers and reduced interest by speculators. U.S. demand, overall, remains soft. In fact, even the latest, most bullish of forecasts now put 2002 copper demand down by 5-6% in North America this year.

"Copper futures at the mid-70¢ area still seem reasonable, considering below-trend U.S. economic growth, concerns about a recovery and bloated metals inventories in the market," notes analyst David Rinehimer at Salomon Smith Barney in New York. Mid-June events such as the force majeure by Canadian producer Noranda Inc. and a slight drop in copper warehouse inventories might have been expected to boost cathode futures prices. "But, I think we're going to see a pretty flat market during the summer period where end-use activity tends to slow anyway," says Rinehimer.

Force majeure is a form of legal protection invoked when unforeseen events impede a company's ability to carry out normal operations. A strike at the Horne smelter forced Noranda to impose force majeure on smelting concentrate into copper anodes for third-party customers. A force majeure should have been bullish for the copper market, which has been suffering a price-depressing supply surplus due to slack demand.

Analyst Curtis Woodworth at J.P. Morgan Securities in New York insists that "copper prices are poised to improve over the remainder of 2002 and into 2003 as global industrial demand recovers and producer curtailments take hold." He says "the message from the mining community remains clear: Production will be pared as long as prices stay depressed." But, Rinehimer points out that a weak stock market, poor corporate earnings news, and worries over renewed violence in the Middle East overshadowed smelting cutbacks and Noranda's force majeure, which reduced speculative interest—and deflated futures prices. Also, as June closed, word came that exchange warehouse stocks in North America, Europe and Asia were still excessive at 1.49 million metric tons.