Singapore. Copper prices are expected to rise when trading gets under way today, lifted by uncertainty over supply in the wake of the 8.8-magnitude earthquake in Chile, traders and analysts said on Sunday.

The earthquake, one of the world’s most powerful in a century, battered Chile early on Saturday, the world’s biggest copper miner, killing more than 300 people.

The quake forced the suspension of up to a fifth of Chile’s mine capacity — estimated at about 4.5 million metric tons of copper in concentrate annually — and even though government officials said exports would continue unhindered, market watchers said prices would rise when trading started today.

“Copper’s sensitivity to Chile is analogous to oil’s sensitivity to tensions in the Middle East. Copper is already a tightening market, and this could accentuate that story,” ANZ’s senior commodity analyst Mark Pervan said.

“And even if the mines themselves haven’t been directly affected, there is a whole lot of infra­structure running through the whole thing — roads, rail and hydropower — that could have been damaged.”

State miner Codelco halted operations at its El Teniente and Andina mines, and Mining Minister Santiago Gonzalez said it could take two days for production to resume.

He also said production at the Caletones smelter had halted. Other Codelco operations were unaffected.

Gonzalez said Codelco had enough stocks to be able to meet its export commitments, and a union leader said the key copper ports of Antofagasta and Mejillo­nes were operating normally, although the smaller copper port of San Antonio was closed.

Anglo-American’s Los Bron­ces and El Soldado mines, which produce about 280,000 metric tons of copper annually, also halted operations, but other major mines were running as usual.

A Singapore trader said: “The government has said shipments will continue normally but people will try to stock up on metal — the 30,000 tons that landed in Shanghai warehouses in the past two weeks will probably find eager buyers — and we may also see some tightening in London Metal Exchange spreads.”

The benchmark LME three-month copper contract closed on Friday at $7,195 a metric ton, having rallied 2.8 percent on the day. Traders said prices could rally by a similar amount today.

This “means copper up to $7,400 on Monday,” another Singapore trader said.
Copper stocks in warehouses monitored by the Shanghai Futures Exchange jumped 28 percent to almost 150,000 metric tons in the past two weeks and had looked like a potential drag on the market, but after the quake, Chinese merchants and consumers were likely to pick up the metal to ensure supply.

“The kneejerk will be to cover. The Chinese are starting to get into full swing after the holidays,” said Jonathan Barratt, managing director of Commodity Broking Services.

“We have seen a steep correction in the past two weeks, but the market closed well bid and people will start to build in a risk premium early on Monday.

“That will remain for as long uncertainty exists and things like assessing the impact on fuel supplies and so on will take some time,” Barratt said.

Source : JakartaGlobe, March 01, 2010