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By Leia Michele Toovey- Exclusive to Copper Investing News

This week, a slew of bad news zapped copper’s recent rally. Copper fell in London on concerns about demand for the industrial metal after the International Monetary Fund said the global economy will shrink this year.  Copper for delivery in three months lost $36.25, or 0.8 per cent, to hit $4,503.75 per imperial tonne at 1:21 p.m. on the London Metal Exchange, rebounding from a drop of as much as 4 per cent. The metal has advanced 47 per cent this year and reached $4,925 a tonne, the highest intraday price since October 20.

Prices for copper have been buoyed in 2009 by Chinese stockpiling. While the global economy is expected to shrink, according to Goldman Sachs, China’s economy is on track to expand by 8.3 per cent this year, compared to a prior estimate of 6 per cent.

Chinese stockpiling and restocking, tight scrap supply and improved demand have lifted copper in Shanghai to a premium to the London price; this arbitrage opportunity has, in turn, supported imports.  So far this week, stockpiles of copper in LME-monitored warehouses fell 1.6 per cent to 450,100 tonnes. Canceled warrants, indicating metal to be taken from storage, stand at 16 per cent of LME inventories.  ”There is a lot of metal destined to leave warehouses going to China,” Robin Bhar, an analyst at Credit Agricole SA’s Calyon unit in London, said by phone. “Warrants are tight.”  This occurrence has pushed copper markets into backwardation, where metal for immediate delivery is more expensive than future contracts.

Demand for industrial metals is “still a China story” while the U.S. economy, the world’s largest, remains in recession. Will the world economy is anticipated to put out a sub-par performance, China is likely to be the main buyer of copper as Japan, Europe and the U.S. are in downturns, Calyon’s Bhar said.

Company News

BHP announced on Wednesday that total output at its majority owned Escondida copper mine in Chile will fall by 30 per cent during the 2009 financial year as lower grades and ongoing issues with a mill will decrease output. Technical issues with the Laguna Seca SAG are expected to be resolved during the September quarter, BHP said. Problems with the mill previously forced the miner to declare force majeure on concentrate deliveries.  Escondida is the world’s largest copper mine, producing 1.22 million metric tons of copper during the 2008 financial year ending June 30. BHP owns 57.5 per cent of the mine; Rio Tinto owns 30 per cent and a Japanese consortium a further 10 per cent. BHP’s share of Escondida copper output stood at 86,600 tons for the quarter, down from 157,000 tons for the same period last year.

Zambia’s 300,000 tonne per year Nchanga copper smelter will resume operations in the first week of May after a fire suspended production early this month, smelter owner Konkola Copper Mines said on Wednesday. KCM, majority owned by London-listed Vedanta Resources Plc operates the Nchanga open pit mine and Konkola copper mines, Fitwaola satellite mine ,and is currently developing the Konkola deep copper mine.

Sterlite Industries Ltd., India’s biggest copper producer, can buy bankrupt Asarco LLC for $1.1 billion in cash and a $600 million note, a judge said. The decision sets up a competition between two plans to reorganize Asarco, a unit of Grupo Mexico SAB. Grupo Mexico, which put Asarco into bankruptcy in 2005, has proposed a $1.3 billion plan that would allow it to regain control of the Tucson, Arizona-based copper miner. Mexico City- based Grupo Mexico lost control of Asarco to a court-approved board a few months after the bankruptcy case began. Sterlite withdrew an earlier bid of $2.6 billion last year, saying it was too high amid a drop in copper prices. Under the proposed sale, Asarco may accept a higher offer until Schmidt gives final approval at a hearing on the company’s reorganization plan.

Freeport-McMoRan Copper & Gold Inc, the world’s largest public traded copper producer, began shipping the first copper cathode produced at its Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo on Wednesday. “Today, we are looking at our first actual shipment of copper from that operation to the marketplace. The first truck shipment is leaving today. It takes an average of 20 to 30 days one way,” Chief Executive Officer Richard Adkerson told analysts on a conference call. “That involves trucking the copper cathode from the DRC to the South Africa marketplace. It’s a test shipment. But we are producing copper there. We have an inventory of cathodes ready for shipment,” he said.

Putting the damper on the good news, earlier in the day the Arizona-based mining company reported first-quarter profit slumped sharply and revenue dropped by more than half as the global economic downturn weakened metal demand and prices. The company took on significant capital expenditures in the first quarter, of which nearly 50 per cent was directly related to Tenke Fungurme. The first quarter expenditures of $519 million are nearly half of the company’s 2009 budget of $1.3 billion. Tenke is on schedule to ramp up to full capacity in the second half of 2009 to an annual production rate of 250 million lbs of copper and 18 million lbs of cobalt.

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