By Leia Michele Toovey – Exclusive to Copper Investing News

Copper moved up early week, influenced by a change in the metal’s supply/demand balance. Tuesday’s NYSE copper session prices spanned from $3.6595 to $3.7450/ lb, the contract’s highest level since July 15. By Wednesday noon, copper hit a high of $3.850/ lb. In India, on the MCX, Tuesday benchmark August copper was trading at 350.15 rupees per kg, up 0.72 percent from the previous session. China was the odd man out as copper futures edged down on evidence that Chinese demand for imports will grow. Shanghai October copper, the most-traded contract on the Shanghai Futures Exchange, was down 0.4 percent at 62,290 Yuan per tonne.

Copper was buoyed by trade data that showed increased copper demand in top consumer China. Overall, China’s consumption growth slowed to an annual rate of 4.8 percent, raising worries that this year’s demand growth will be lower than the 7 percent to 15 percent many analysts have expected. However, the report showed good news for copper with a total consumption of 2.43 million tonnes in the first half of the year, up by 112,257 tonnes from a year earlier.

Internationally, an expected copper surplus has been wiped out by shrinking copper mine output, and Latin American labour disruptions. In January, analysts expected a 2008 surplus of 160,000 tonnes of copper. Now, the numbers are showing that by the end of ’08 there will be a deficit of 68,000 tonnes.

In the past week, the first and second biggest copper producers have announced the bad news of shrinking supply. Second largest producer Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) scaled back its forecast for full-year copper sales by 100 million pounds, to 4.1 billion, due to problems at its Safford and Morenci mines in Arizona. They predict output declines to cause copper sales to be 2.4% less than projected in April. The company cited production delays at its new Safford mine and output at the Morenci pit that trailed expectations. Richard Adkerson, Freeport’s CEO said that the “copper market continues to be tight” and that mining companies are “challenged” to meet production targets. Adkerson claimed that higher production costs, especially for fuel, have created a “barrier” to increasing mine output. This news has caused Freeport’s second quarter ’08 profits to decline 14.1%.

On Wednesday, BHP Billiton (NYSE:BHP) revealed that their majority held Escondida mine will see a 10 percent to 15 percent output decline in 2009. The Escondia mine, located in Chile, is the world’s biggest copper producer- supplying nearly 10 percent of global demand. The expected reduction is a result of diminishing ore quality. Escondida came into production in the early 90’s, and was projected to have a 40 year lifespan. Remaining reserves are estimated to be 4.2999 billion tonnes of 0.807 percent copper. To get the most out of the mine, the open pit will be expanded, and in this process the Los Colorados concentrator will be destroyed. A replacement concentrator with higher throughput to offset falling ore grades will be constructed. Escondida’s ownership is divided 57.5% BHP Billiton, 30% Rio Tinto, and 10% Japanese Escondida Corporation, and 2.5% International Finance Corporation.

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