Codelco mine fire may fuel copper prices

MARKET OUTLOOK

Copper is likely to continue its gain this week on production halt at Codelco's Radomiro Tomic mine in northern Chile, which accounts for about 17 per cent of the company's annual output.

Nickel may also touch a lifetime high of $50,000 a tonne this year if inventories decline further. Although, the current prices are extremely high, they appear speculative and vulnerable to any slowing of demand. Nickel producers may raise their output this year to cash in on higher prices.

Speculations are rife that copper supply will be disrupted for a short time and take at least a fortnight to resume fully from the state-owned Codelco. The mine was shut because of a fire on March 2.

Towards the previous weekend, a $150 fall in the price of the red metal was apprehended owing to Chinese stockpiling at the current lower prices.

China, the world's largest base metals user, has signalled a slowdown in demand due to sudden spurt in inventories. But, traders believe the demand will bounce back this week due to the fear of availability of copper and, hence, stockpiling by local traders will strengthen further.

Stockpiles in warehouses monitored weekly by the Shanghai Futures Exchange (SHFE) rose to 46,913 tonne, the highest since September 7, an addition of 6,027 tonne from March 2.

Although, the stockpiling gave the price a pause, the hunger for the red metal may push the prices up further, as bulls remained very active relying upon the anticipated Chinese buying.

Copper prices have more than doubled in the past three years, as consumption jumped in China, the world's fastest-growing major economy.

Copper spot prices witnessed a jump of 6 per cent or $324 last week to $6,135 from $5,811 which was partly attributed to a decline in inventories in the LME-registered warehouses by 4,600 tonne to 202,575 tonne from 207,175 tonne.

The concern for the movement of the metal price, above all, was fuelled by a rising unemployment rate in the US, which indicates worsening economic slowdown in the country.

The slowdown in the USA, the second largest consumer of base metals only after China, would spread to other countries as well, if the trend continues for long.

Following copper, other base metals trading on the LME recorded marginally high on a weekly basis, with aluminium gaining $24 from $2,698 to $2,722, nickel $2,805 from $42,470 to $45,275, tin $495 from $13,275 to $13,770) and zinc surging $44 from $3,230 to $3,274.

Nickel remained in the limelight during the previous week, with the silvery-white metal hitting a record high of $45,500 mid-week due to a sharp decline in inventory.

Increasing demand for industrial metals has left mining companies struggling to fill a supply gap, causing inventories to shrink. Nickel inventories have plunged by 90 per cent in the past year and those of tin have fallen by 34 per cent.

Gradually moving towards 'zero' inventory, the nickel stockpile slumped to 3,870 tonne, while tin stocks declined to 10,900 tonne on Friday.

Experts believe the current nickel stocks are equivalent to less than a day of global consumption.

In the Mumbai non-ferrous metals market, a mixed trend prevailed due to scepticism among traders. Copper wire bars gained 4.44 per cent from Rs 338 a kg to Rs 353 a kg, while nickel cathode gained 1.46 per cent to Rs 2,080 a kg from Rs 2,050 a kg.

However, prices of aluminium ingots and zinc slabs declined by 1.04 per cent and 1.62 per cent to Rs 142.5 (Rs 144) a kg and Rs 182 (Rs 185) a kg, respectively.