Copper Gains as Strikes in Mexico Reduce Concentrate Supplies By...

Copper Gains as Strikes in Mexico Reduce Concentrate Supplies

By Millie Munshi

Sept. 13 (Bloomberg) -- Copper rose to a two-week high after Southern Copper Corp. said strikes may reduce output this year, renewing supply concerns.

A walkout under way since July 30 at three Mexican sites has cut concentrate shipments to refineries, Chief Executive Officer Oscar Gonzalez Rocha said yesterday. Copper, used in pipes and wires, has gained 18 percent this year as global demand outpaced production.

``Supply conditions warrant a rebound'' in the price this year, Deanne Gordon, an analyst at JPMorgan Chase & Co., said in a report. ``Inventory remains stretched.''

Copper futures for December delivery gained 3.7 cents, or 1.1 percent, to $3.3965 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $3.4285, the highest since Aug. 27.

``Our mines, especially Cananea, the most important one, are definitively paralyzed and aren't producing concentrates, so our smelters and refineries are producing less copper,'' Gonzalez said.

The company resumed wage talks with three Peruvian unions that called off a strike set for yesterday, he said. Southern Copper is the world's fifth-largest producer of the metal.

``Supply is growing much more slowly than anybody imagined,'' Stephen Briggs, an analyst at SG Securities in London, said in a telephone interview. ``Mines are not producing what one might have expected, and that's what's going to keep the copper price buoyant.''

Consumption of the metal topped supplies by 300,000 metric tons in the five months ended May 31, according to the International Copper Study Group. Mining companies including Xstrata Plc, Teck Cominco Ltd. and Rio Tinto Group have reported lower production this year.

U.S. Economy

The metal extended gains after a report showed first-time jobless claims in the U.S. rose less than forecast last week, easing concern that the economy is slowing. Initial unemployment claims climbed by 4,000 to 319,000 in the week that ended Sept. 8, the Labor Department said.

Before today, copper dropped 1.1 percent this month on concern that cooling economic growth would reduce metals demand in the U.S., the world's second-largest copper user after China.

``Copper is tracking investors' perception of the health of the world economy,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``The economy needs to keep chugging along for copper demand to stay high.''

On the London Metal Exchange, copper for delivery in three months gained $118, or 1.6 percent, to $7,538 a metric ton ($3.42 a pound). The metal rose to a record $8,800 a ton in May 2006.

To contact the reporter on the story: Millie Munshi in New York at [email protected] .

Last Updated: September 13, 2007 14:22 EDT