Source: www.theaustralian.news.com.auFeast from famine: copper,...

Source: www.theaustralian.news.com.au

Feast from famine: copper, nickel soar as supplies fall
Kevin Andrusiak
April 23, 2007

METAL prices are expected to continue their upward trend this week as global shortages and labour disputes stretch already tight supplies.

Copper prices are on a seven-week roll that could continue, despite hopes of a resolution to a worker protest over pay at Freeport-McMoRan's Grasberg mine in Indonesia.

The mine contributes about 4 per cent of total global copper output but has been forced to scale back production because of the strike.

It is believed to be operating at 20 per cent capacity.

Copper prices climbed 0.7 per cent in New York trading on Friday and was trading at $US3.6244 a pound, or $US7938 ($9500) a tonne, on the London Metal Exchange spot market.

Copper stocks in LME-monitored warehouses have fallen to just over 169,000 tonnes, down about 8 per cent in a month and at the lowest level since December 12.

Analysts said copper buyers were stocking up as they awaited a resolution to the Grasberg dispute. "They're concerned that Indonesia could get below production," RBC Capital Markets vice president George Gero told Bloomberg.

"If you're a copper dealer now, you're living with a bottle of Tums (antacid) next to your telephone."

Despite the problems at Grasberg, the International Wrought Copper Council, an industry body representing copper miners, believes copper production will exceed supply for the year.

Nickel prices are also buoyant and could exceed the record price of $US50,150 a tonne set last week. Like most metal prices, nickel is being driven higher because of rampant demand from the emerging economies of China and India.

The spot nickel price on the LME is hovering around $US23 a pound, or $US50,660 a tonne.

LME data also shows there is only 4056 tonnes of nickel in storage, down about 17.5 per cent from March 23.

Citigroup analysts believe that while nickel should average about $US22 a pound for 2007, increased supply as miners ramp up production should see it drop to about $US8.50 a pound next year and $US7.50 a pound in 2009.

They also predict copper prices will average $US3.50 a pound this year and $US2.50 a pound in 2008.

"While demand destruction at prevailing commodity prices is a concern, the level of substitution and thrifting to date has been less than expected and has been more than offset by investment demand," the broker's metals and mining team said in a report last week.


End.

Cheers, Pie