copper jumps to four week high

Copper Jumps to Four-Week High as Protests Shut Mines in Peru

By Millie Munshi

June 18 (Bloomberg) -- Copper rose to the highest in almost four weeks in New York as a protest threatened production in Peru, the world's third-largest supplier of the metal.

Southern Copper Corp. plans to close its Ilo smelter and Toquepala and Cuajone mines in Peru tomorrow after days of protests over a mining tax, Chief Executive Officer Oscar Gonzalez Rocha said yesterday in an interview. Copper has more than quadrupled in the past five years partly as output disruptions left mining companies struggling to meet demand.

``The Southern Copper story is giving copper an extra boost,'' Michael Gross, a futures analyst at OptionSellers.com in Tampa, Florida, said today in a telephone interview. ``Supplies have been tight already and this disruption certainly adds to concern about supplies in the short term.''

Copper futures for September delivery gained 9.7 cents, or 2.7 percent, to $3.7475 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $3.759, the highest since May 22.

Most-active futures moved higher because the market is ``taking its cue from the situation in Peru,'' Edward Meir, an analyst at MF Global Ltd., said today in a report.

Peru's Mining Federation, representing about 28,000 workers and 70 unions, is also planning a national strike on June 30 to pressure Congress to vote on a separate measure to improve pensions, the rights of subcontracted workers and company profit-sharing. Workers at the Cuajone mine run by Southern Copper, a unit of Grupo Mexico SAB, walked out yesterday in a 48-hour strike to press for higher pay, a union official said.

``Supply uncertainties give some price support'' to copper, Michael Widmer, a metals analyst at Lehman Brothers Holdings Inc., said today in an e-mailed note.

Reduced Production

Labor unrest in Latin American countries, including Mexico and Chile, has reduced mine output in the past year. Chile is the world's biggest copper producer, followed by the U.S.

Depending on how long output disruptions in Peru last, copper may trade as high as $4 a pound, as supply concerns fuel interest from investors, Gross of OptionSellers said.

Copper touched a record $4.2605 a pound on May 5, boosted by supply concerns stemming from disruptions in Chile and on rising demand from hedge funds and other speculators.

Copper output trailed demand by 42,000 tons from January through April, the World Bureau of Metal Statistics said today, narrowing a deficit of 135,800 tons in the same period a year earlier. Consumption remained ``virtually unchanged'' at 6.04 million tons, the Ware, England-based company said.

The metal will average $3.60 a pound this year, Kieran Daly, a Johannesburg-based analyst at Investec Ltd., said today in a report. That's higher than Investec's previous estimate of $3.20 a pound. Rising production costs will limit future copper supplies, Daly said.

On the London Metal Exchange, copper for delivery in three months rose $151, or 1.9 percent, to $8,239 a metric ton ($3.74 a pound). The metal has gained 23 percent this year.