Copper Climbs to Three-Week High as Greek May Receive More Aid

Copper Premiums in China Advance to Seven-Month High as Demand Recovers

Steel output may fall as power cuts loom

COPPER ROUNDUP-Mine output drops in Q1, supply gap could widen

 NEW YORK, May 23 (Reuters) - Global copper mine production
hit speed bumps last quarter, interrupting a growth trend that
the copper industry counted on to meet strong global demand and
justify aggressive expansion plans.

 The drop in copper output from the world's biggest listed
mining companies in the first three months of 2011 could
temporarily exacerbate a supply deficit that contributed to the
rise in copper prices to record highs this year.

 After rising for three straight quarters, production from
the 11 biggest publicly listed miners fell by 8 percent in the
first three months of 2011, due to declining ore grades and
adverse weather conditions, data from companies showed last
month.

 One of the hardest hit miners in the group was Anglo
American (AAL.L: Quote). Anglo American's Collahuasi and Los Bronces
mines in Chile hit such roadblocks, resulting in a 14 percent
drop in first-quarter copper production from 2010 levels.

 The data lend support to the bullish argument that the
copper market will likely see a deepening deficit this year as
existing operations struggle while new projects are still a
year or two away from making a significant contribution.

 This view has helped support the price of the metal, which
is up more than 20 percent from the first-quarter of 2010.

 Copper rose to all time highs in February near $4.62 a lb
in New York and $10,000 per tonne in London.

 High prices left companies like Freeport McMoRan Copper &
Gold (FCX.N: Quote) looking flush enough to increase their exploration
budgets, in which case any copper deficit blow-out could be
short-lived as could some of the supply-driven strength in
prices.

 "Escondida was supposed to be down 10 percent year-on-year
due to ore grades, Freeport's Grasberg was down 17 percent, and
Collahuasi had problems due to heavy rains in January and
February," said Catherine Virga, senior base metals analyst
with CPM Group in New York.

 "This keeps the concentrate market fairly tight."

 Output from 11 of the world's largest miners, who together
produce about a tenth of the world's copper, fell to 1,8443,445
tonnes in the quarter, the lowest quarterly tally since the
first quarter of 2010 when output hit 1,812,040 tonnes.

 The figures exclude Chile's state-owned Codelco [CODEL.UL],
which accounts for around 11 percent of the world's mined
copper but reports its first-quarter production figures later
than other companies.

 Production in Chile, the world's largest producer of
copper, fell in the first quarter of this year relative to
last. [ID:nSGO002181]

  "With not a lot of capacity coming on stream, you're likely
to have a tight supply/demand pattern," said Rodman & Renshaw's
managing director Wayne Atwell, who has more than 35 years of
experience in the field of investment analysis for the metals
and mining industries.

 According to the International Copper Study Group (ICSG),
global mine capacity utilization rates fell for a third
straight month in January to stand at 77.8 percent.

 "Overall, 2011 will be a challenging year to see meaningful
growth from existing operations," said Terry Ortslan, a mining
analyst with TSO & Associates in Montreal, with over 30 years
of experience in the industry.

 Two operations -- a production restart at Grupo Mexico's
(GMEXICOB.MX: Quote) Cananea mine in Mexico and a ramp-up of
Antofagasta's (ANTO.L: Quote) Esperanza mine in Chile -- offer the
biggest boost to mine supply growth this year, but analysts do
not expect enough extra concentrate to alter the overall
trend.

 "It is difficult to really have an expectation that there
will be an improvement," said Nicholas Snowdon, analyst with
Barclays Capital in New York.

 "Apart from those two facilities, there are no other mines
that are ramping up, offering over 100,000 tonnes of fresh
output this year."

 PRICE INCENTIVE

 With benchmark prices of the metal CMCU3 sitting well
above the marginal cost of production, generally seen above the
$2 to $2.50 per lb range, more restarts, expansion projects and
new production ramp-ups should eventually boost mine capacity
rates.

 Still it will likely take until 2012 or later before any
supply-side impact would likely be felt.

 "The industry is trying quite hard to bring production up
because the profitability is so high with prices so strong, but
there is a limit to how quickly they can do that," Rodman &
Renshaw's Atwell said.

 Freeport, the world's second-largest producer behind
Chile's Codelco, raised its 2011 exploration budget to $225
million from the $200 million announced in January, in an
effort to move full steam ahead with expansion and restarts.

 About $1.3 billion of the capex budget will go primarily to
underground development of the Indonesian Grasberg copper mine,
construction activities at the Climax molybdenum mine in
Colorado and development of the El Abra sulfide deposit in
South America. [ID:nN20191756]

 With new copper production capacity set to come onstream in
North America and Australia in 2012 and 2013, Christine
Meilton, chief consultant at CRU, said the market could be in
surplus as early as 2013.

 Speaking to Reuters at the consultancy's World Wire and
Cable Conference in Amsterdam this week, she said, "Demand is
forecast to show much more steady growth which is why we see
the market moving from a deficit this year to surplus and then
deficit."
  (Reporting by Chris Kelly; Editing by Alden Bentley)

Copper May Climb on Rebound Speculation, According to Survey

By Allen Sykora
U.S. aluminum premiums have eased over the last week along with the strength of the front-end backwardation in the LME forward curve, in conjunction with “hefty” inventory deliveries into London Metal Exchange and Shanghai Futures Exchange warehouses in recent days, says Barclays Capital.

U.S. premiums are now reported around 8.75 to 9.5 cents a pound, which is moderation from 9-10 cents at the start of the month although still well above 6.2-6.6 cents at the start of the year, Barclays says.

However, European premiums remain at record levels and Barclays says broader aluminium demand remains “robust.” Meanwhile, Barclays cites market concerns that the severe flooding along the Mississippi River could disrupt activity at the five largest smelters in the U.S.

“While no disruption to production has occurred at any of the facilities, they all source their alumina from shipments along the waterway and are currently running down stocks until the flooding subsides or alternative delivery routes are achieved,” Barclays says.

By Allen Sykora of Kitco News; asykora@kitco.com
 

Copper price supported by output deficit -Aurubis

HAMBURG May 16 (Reuters) - Global copper prices are likely to remain well-supported despite recent weakness with a global production deficit forecast in 2011, Aurubis (NAFG.DE: Quote), Europe's biggest copper producer, said on Monday.

Copper Rises as Europe Economic Growth Fuels Demand Prospects

By Yi Tian and Agnieszka Troszkiewicz

May 13 (Bloomberg) — Copper rose for the fourth time in five days as Europe’s economy expanded faster than analysts forecast, enhancing prospects for raw-material demand.

Gross domestic product in the 17-member euro area gained 0.8 percent in the first quarter from the fourth, the European Union’s statistics office said today. That was the fastest pace since the second quarter of 2010. Economists forecast 0.6 percent growth, according to a Bloomberg News survey.

“Copper is a global play,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “As long as there is global growth, demand will be increasing.”

Copper futures for July delivery increased 1.3 cents, or 0.3 percent, to close at $3.9835 a pound at 1:10 p.m. on the Comex in New York. The price rose 0.2 percent this week. The metal has dropped 14 percent from a record $4.6575 on Feb. 15 on concern that China, the world’s biggest user, would seek to damp its economy to curb inflation.

The worldwide economic recovery “indicates sustainably high copper demand that cannot even be harmed by China’s restrictive interest-rate policy or the economic weakness of certain countries,” Aurubis AG, Europe’s biggest smelter, said today in a statement.

“The fundamental conditions that suggest a production deficit, and thus represent the basis for a high price level in 2011, are intact,” Hamburg-based Aurubis said.

On the London Metal Exchange, copper for delivery in three months climbed $58, or 0.7 percent, to $8,788 a metric ton ($3.99 a pound).

Zinc also rose in London. Aluminum, lead, nickel and tin fell.

–Editors: Patrick McKiernan, Steve Stroth

To contact the reporters on this story: Yi Tian in New York at ytian8@bloomberg.net; Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

China’s Commodity Deals Dropping as Oil, Copper Prices Rise

May 11, 2011, 5:03 AM EDT

May 11 (Bloomberg) — China, the world’s biggest user of natural resources, is pulling back from commodities and energy acquisitions as the rest of the world pursues deals at the fastest pace since the financial crisis.

China’s companies have spent $14.2 billion on acquisitions this year, down 30 percent from the same period last year, according to data compiled by Bloomberg. Worldwide the value of takeovers in the industry is $176 billion, the most at this time of the year since 2007. U.S. companies from Alpha Natural Resources Inc. to DuPont Co. are the largest buyers.

After China snapped up assets from a stake in Repsol YPF SA’s Brazilian unit to Ugandan fields from Tullow Oil Plc, political unrest in countries such as Egypt and Libya helped push up commodity prices this year. The rebound led Glencore International AG to offer shares this month in the year’s biggest initial public offering, which may value the commodity trader at about $61 billion.

“Faced with strict regulatory control over Chinese acquisitions in the U.S. and other countries, Chinese companies have been shifting targets,” said Guan Anping, a professor at the People’s University of China in Beijing and a former Chinese trade official. “The turmoil in North Africa and Middle East highlighted the risks of resources investment in the region. Chief executives of state-owned enterprises became very cautious.”

Lubrizol, Danisco

U.S. buyers lead acquisitions this year, with the biggest deal coming from Warren Buffett’s Berkshire Hathaway Inc.’s $9.2 billion takeover of lubricant maker Lubrizol Corp. Mine owner Massey Energy Co. agreed in January to an $8.3 billion buyout from Alpha Natural Resources Inc. DuPont last month raised its bid for Danish food-ingredients maker Danisco A/S to $6.4 billion.

Morgan Stanley has advised on 16 deals valued at $55 billion so far this year, the most among investment banks. Goldman Sachs Inc. comes second at $46 billion, and Credit Suisse has advised on $35 billion in transactions.

Most Expensive Deal

China lost the contest for Equinox Resources Ltd. last month, with Toronto-based Barrick Gold Corp.’s C$7.3 billion ($7.6 billion) bid trumping Minmetals Resources Ltd.’s C$6.3 billion offer.

The takeover was the most expensive copper mining acquisition, according to data compiled by Bloomberg. The battle came as China’s currency fell 2.8 percent against the Canadian dollar over the past six months. Against the euro, the yuan has dropped 3.2 percent in the same period.

U.S. Treasury Secretary Timothy F. Geithner said this week that China needs a stronger yuan to contain prices and spur domestic demand. His case was bolstered by official data out today showing that inflation in the fastest-growing major economy has exceeded Premier Wen Jiabao’s 4 percent target each month this year.

“China is still pursuing acquisitions, but they are not the only game in town anymore,” said Richard Horrocks-Taylor, head of mining investment banking at RBC Capital Markets in London. “Chinese acquirers have become more sophisticated and more thorough in their assessment before they make an offer.”

In mining, China had already retreated last year, making acquisitions worth $4.5 billion compared with $10 billion in 2009, according to Ernst & Young LLP.

Oil, Copper Prices

Valuations on mining and energy companies have gone up after crude oil jumped 43 percent in the past year to more than $110 a barrel in London and copper advanced 24 percent. The Standard & Poor’s GSCI Total Return Index of 24 commodities has beaten bonds, stocks and the dollar every month since December, the longest run in at least 14 years.

Baar, Switzerland-based Glencore’s IPO will set benchmarks for assets as it raises funds in London and Hong Kong, said Christine Tiscareno, an equity analyst at Standard & Poor’s.

“Prices are at the peak,” Tiscareno said. “China is very shrewd to take a back seat until they see what happens with Glencore. Even though they can afford to pay up and they need the resources, prices are likely to come down.”

Commodities tumbled last week on concern the global economy may slow. The S&P commodities index slid more than 10 percent, and crude oil declined more than 12 percent. Copper fell to the lowest price in almost five months last week on concern that higher interest rates will lead to slower growth and inflation.

China faces political opposition to some deals. Australia blocked a $2.8 billion bid by state-owned China Minmetals Corp. for OZ Minerals Ltd. in March 2009 on national security concerns. Australia also helped stymie Aluminum Corp. of China’s planned $19.5 billion investment in Rio Tinto Group.

Political Barriers

“Political barriers raised by Western countries have frustrated Chinese in overseas takeovers,” said Heng Kun, an analyst with Essence Securities Co. in Beijing. “But that’s unlikely to deter their expansion plans in the long run. China will continue to seek iron ore, oil, copper, uranium and minor metals that are in domestic short supplies.”

China will build 10 cities larger than New York by 2025 and will need to import more steel, iron ore, coal, aluminum and copper, Rio Tinto’s Chief Economist Vivek Tulpule said last year. The nation will almost triple its annual use of copper to 20 million tons in 25 years, according to CRU, a London-based metals and mining consulting company, prompting companies to seek control of mines oversees.

“China has a longer-term strategic imperative to secure sources of future supply for commodities,” said Ric Ronge, who helps manage the equivalent of $1.3 billion at Pengana Global Resources Fund in Melbourne. “They will keep buying.”

–With assistance from Brett Foley in London, Elisabeth Behrmann and Sarah McDonald and Garfield Reynolds in Sydney, Rebecca Keenan in Melbourne, Helen Yuan in Shanghai and Bloomberg News in Beijing. Editors: Stephen Cunningham, Will Kennedy.

To contact the reporter on this story:

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net

Aluminium prices soar on long lead times

Aluminium premiums shot to record highs this week in the US Midewest, closing in on the 10 cent-per-lb level, as lengthy lead times out of North American warehouses continued to choke off supply flows.

Spot prices paid over the London Metal Exchange (LME) climbed to an all-time peak at 9.5 to 9.75 cents per lb this week, up more than 45% since the start of the year.

That meteoric rise has been fuelled largely by increasingly strong domestic demand and a growing regional deficit in North America, where incentive-based finance deals continue to attract greater amounts of the metal into the warehouses.

Nowhere have these "deals" created more bottlenecks in the supply chain than in Detroit, where more than 1.1 million tonnes of the lightweight metal sit.

With warehouse incentives in Detroit creeping up toward $150 per tonne, producers have continued to follow the money trail, preferring to store metal away cheaply for an extended period of time.

"Right now the producers are very happy being able to deliver into an LME warehouse, get paid net cash … a very high incentive, and they don't have to deal with any credit risks," one East Coast physical dealer told Reuters.

"Even with the higher premiums and the higher LME price, none of these financing deals are being broken because these guys are in the business of financing metal, not playing in the physical market."

The end result of these "deals" has created a bottleneck in the supply chain, pushing lead times for delivery of newly issued warrants out as far as February 2012.