arvo ralley, page-57

re: mr market is saying bhp only worth 27 "Copper Rises on Growing German Demand as Strike Enters 2nd Week

Aug. 14 (Bloomberg) -- Copper prices rose for the first time in three sessions on speculation demand may pick up as a strike at the world's biggest copper mine, Escondida in Chile, enters a second week.

Economic growth in Germany, the world's fourth-biggest copper consumer, expanded at the fastest pace in five years in the second quarter, the Federal Statistics Office said. Growth was led in part by construction, the largest use for copper. The Escondida mine, controlled by BHP Billiton Ltd., accounted for 8.5 percent of global mined copper last year.

``Germany is a big economy, and if their construction is gaining strength, that is positive for metals,'' said William Adams, an analyst at Basemetals.com in Saffron Walden, England. ``There is still a danger that the Escondida strike could carry on longer, maybe three weeks.''

Copper for delivery in three months rose $100, or 1.3 percent, to $7,670 a metric ton at 5:15 p.m. on the London Metal Exchange. Prices tumbled 5.7 percent in the previous two sessions, partly on speculation the strike might end soon.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery gained 4.35 cents, or 1.3 percent, to $3.52 a pound. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

The metal, which is used to make electrical cables and plumbing, has gained 72 percent this year as strikes and other disruptions reduced output, forcing buyers to dig deeper into inventories. Stockpiles monitored by the LME were 111,375 tons, up 125 tons from Aug. 11, the exchange said today.

Demand May Top Output

China is the world's biggest copper user, followed by the U.S. and Japan, according to International Copper Study Group figures. Global demand will beat production by about 200,000 tons in 2006, UBA AG forecast last month.

A union representing workers at Escondida will meet with BHP Billiton tomorrow. Workers want salary increases of 13 percentage points above Chile's inflation rate and a bonus of 16 million pesos ($29,490) each. The two sides have been discussing issues such as the role of workers in company policymaking.

``We want to talk about the difficult points now to see what the company's position is,'' Pedro Marin, a spokesman for the mine's union, said yesterday.

Concerns about supply disruptions and the strike will continue to buoy prices, metals analysts said. Management said after the strike started Aug. 7 that production at Escondida has fallen about 60 percent. The union said output was cut by 80 percent.

``The general sense is that this would be a protest strike for 24 hours and they'll be back,'' said Peter Hickson, global commodities strategist for basic materials at UBS Ltd. in London. ``The fact that this has been going on for a week is longer than the market has expected.''

Twelve of 16 analysts, traders, investors and buyers surveyed by Bloomberg on Aug. 9 and 10 said copper would rise this week on speculation that labor unrest may spread. Wage negotiations are scheduled at other mines in Chile, Canada and Peru.

``Regardless of what happens at Escondida, you've got Codelco contracts coming up as well,'' Hickson said. ``There are a fair amount of disruptions on the horizon, everywhere it looks pretty tight.'' Codelco, owned by the Chilean government, is the world's biggest copper mining company."

Will be interesting to see what happens to the share price of BHP when this strike is resolved. UP is the only way I can see this going.