Copper nudging towards $8800

Copper prices, supported by a strike vote at the world's largest copper mine in Chile "� besides fundamental triggers like current short supply, today rose nearly 2 per cent in London and are inching towards the historical $8,800-a-tonne level scaled in early May this year.

Last week, the spot prices of the red metal gained $378 to touch $7,639 on Friday, from $7,261 a tonne on Monday.

In the week, the copper market was supported by a rockslide at Chile's Codelco, the world's largest copper producer, and critically low exchange inventory levels.

The uptrend in copper continued this week too, as the spot prices surged to touch the next resistance level of $8,000 a tonne today, thus recording a gain of approximately $730 in a week.

This upmove in prices is attributed to a possible threat of supplies, already much below the world's one-day consumption level, of about 125,000 tonne. The supply tightness is adding to the worries of copper producers already in a spot of bother.

A strike looming large at Chile's Escondida mine, a slashed production at Codelco's Chuquicamata mine and miners rioting at the Chambishi mine in Zambia are posing a further threat of short supply in the world market.

The situation has led to consumers going in for fresh buying to run their mills, fearing a further short supply and consequent rise in prices.

Reports in a section of media said the government has accepted the request of the Escondida union seeking its mediation. A government representative is, reportedly, set to join BHP Billiton at the negotiating table this week in an effort to avert the 2,000-employee strike at Escondida slated to begin on August 7.

Escondida workers last Friday voted to strike after they had reduced output at the mine to force management to raise its contract offer. The current contract expires on August 2. Escondida sources said the company is already producing 40 per cent less copper because of the slowdown.

In line with hot global copper prices, in the domestic market, copper wire bar perked up by about Rs 18 a kg this week to Rs 418 today in Mumbai's non-ferrous metal market.

City-based copper scrap trader Surendra Mardia does not see a big jump from the current levels.

He said, "Copper prices on the London Metal Exchange will continue moving in the $7000-8000 a tonne range as demand remained flat. In fact, consumers have slowed down their offtake owing to higher prices and have started looking for alternatives like aluminium and plastics."

"Whenever, prices go up, consumers start using alternative material. For a very long time now the price of the red metal is much higher than its production cost. Therefore, consumption is expected to drop drastically this year," another local trader said.

With the start of Jhagadia Copper (formerly SWIL Ltd), India has become a net exporter of copper with a surplus capacity of about three lakh tonne, of a total production of 6.5 lakh tonne from the organised sector.

The second-largest domestic copper producer Hindalco Industries is planning to acquire more copper mines overseas, after some acquisitions Australia over the last two years, to meet its raw material requirements.

Hindalco gets 25 per cent of its annual copper concentrate requirements from the mines it acquired in Australia. The company looks to increase the level to 40 per cent with more acquisitions of copper mines in Australia and Africa.