By Leia Michele Toovey- Exclusive to Copper Investing News

Copper sat in relative limbo as investors focussed on the government’s proposed financial bailout plan.

On India’s Multi Commodity Exchange, the MCX, futures were steady with an upside bias as a week dollar and rising crude extended support. The upside, however, was capped by bailout uncertainties.

Thursday’s benchmark November copper was up 0.42 per cent at Rs 319.3 per kg. Most of the upside impetus came from the weaker dollar making dollar-denominated commodities like base metals cheaper for holders of other currencies. Crude oil also supported the red metal as it rose above US$108 a barrel on Wednesday, boosted by expectations of a sharp fall in U.S. fuel stocks.  

Copper closed with its third straight loss on Thursday, falling 1.29 per cent at the London Metal Exchange, trading for US$3.13206 per pound compared to US$3.17288 on Wednesday and US$3.21597 on Tuesday. Copper prices were steady in London and Shanghai on Friday, after modest overnight gains, but the uneasy feeling gripping the markets meant trade was thin. 

Data released about the US economic health remained negative for industrial commodities. Orders for U.S. manufactured goods plunged in August, and the number new jobless claims shot up. There was some reassurance when it came  to China demand, copper inventories, which have fell close to 9,000 tonnes this week, mostly in warehouses in South Korea. A sign that the world’s largest copper consumer is drawing down the Korean inventories.

 State-owned Chilean copper miner, Codelco, has suspended a deal that would have given the Chinese company Minmentals the right to buy about half of its newest mine. Codelco said Tuesday that the companies had agreed to suspend the deal “in the spirit of long-term cooperation.” The new Codelco mine, Gabriela Mistral, received a big chunk of financing required for construction from Minmetals. In exchange, the Chinese company was to receive copper over the next 15 years at prices below the spot rate, as well as an option to acquire a stake of up to 49 per cent of the Gaby mine. Now that the purchase agreement has been curtailed, it is unknown what agreement has been reached in exchange for the US$550 million investment.

Codelco’s powerful labour union opposed the stake sale from the start, saying the mine was a national asset and threatening nationwide protests. The new mine has the capacity to produce about 150,000 tons of copper each year which makes it one of the largest new sources of the metal to enter an extremely tight market in recent years.  

According to China Minmetals, the door was still open to revisit an option to buy a stake in the Gabriela Mistral copper mine in northern Chile if Codelco, the world’s biggest copper producer, agreed. The other part of the agreement, giving Minmetals favorable pricing, remains unchanged. Codelco said it would continue to work with Minmetals in new business and exploration opportunities in copper mining, with a focus on Latin America and Africa. The company said specific prospects had been identified.

Rio Tinto, the world’s fifth largest copper producer, expects the market to remain “tight” as operators struggle to maintain supply because of disruptions and a lack of new discoveries. Investors had failed to appreciate fully how much output would be curbed by labour and equipment shortages, rising costs and a switch from surface to underground mines, said Bret Clayton, the chief executive of Rio Tinto Copper.

Rio Tinto is developing new projects in Mongolia, Peru and the U.S. to counter falling output from old mines and meet construction demand in emerging economies. Most supply growth in the next three years would come from central Africa and Peru. The proportion of copper coming from more costly and problematic underground mines would double to 50 per cent by 2020 as surface deposits were mined out. New mines developed in central Africa are considered “higher risk regions”, and all mines are faced with rising operating and developing costs.