By Leia Michele Toovey- Exclusive to Copper Investing News

It has been a volatile week for copper prices. On Wednesday, copper tumbled to its lowest price since March 2006 over concern of a global recession.

Three-month copper on the London Metal Exchange (LME) closed at US$5,240 per tonne. Later on Wednesday, the U.S. Federal Reserve, European Central Bank and four other central banks lowered borrowing costs in an unprecedented effort to thaw credit amid the expanding financial crisis. The People’s Bank of China even joined in, coordinating for the first time with the Group of Seven in lowering its key rate. 

On Thursday, the cut in interest was considered to be the main factor to copper’s upswing.  Three-month copper on the LME rose to US$5,340 a tonne.  Although the upward trend was positive, a poor immediate demand outlook weighed down the ascent. Another sign of dwindling demand were stocks in the London Metal Exchange warehouses, which are currently above 209,000 tonnes, up more than 15 per cent since the start of September.

With the current economic conditions, copper – a leading indicator of economic health - is anticipated to perform poorly. A worsening outlook for demand for metals and energy has prompted a sell-off in all commodities that are sensitive to global economic growth. Forecasters predict that overall copper demand growth will fall to zero this year, in comparison to last year’s growth that was in the range of 2-3 percent. Analysts are stating that the only thing that will extend some positivity to copper price is a significant increase in Chinese demand.  Many were hoping that following the Olympics demand from the major consumer would pick up. Those who were anticipating this are still holding their breath as a post-Olympic pickup has thus far disappointed.

At the root of copper price crash is the crisis in financial markets provoking a flurry of downgrades for economic growth. It is now apparent that America’s economic woes have extended Britain, Europe, as well as emerging economies China and Latin America. Gayle Berry, an analyst with Barclays Capital spoke on this event stating, “The events of the past few weeks have changed the economic landscape and with it the outlook for metals demand.” Not only does U.S. consumption look as though it will be weak for longer, but European consumption has fallen quickly and sharply and we don’t think the worst is over yet.

Company news

Atlas Consolidated Mining expects to generate US$62 million in gross proceeds by hedging copper concentrates produced at its recently rehabilitated Cebu mine for a Swiss metal trader. The deal was signed on Aug 26, and to Atlas’s advantage is based on August copper prices.  August copper prices were approximately US$7,600 per tonne, compared to the current US$5,300 that copper is trading at.

The first phase of Codelco’s expansion at its Andina mine is kicking in.  The expansion means that output at the mine will end the year at 220,000 tonnes, and is anticipated to hit 240,000 tonnes for 2010. By 2015, the output will reach a staggering 600,000 tonnes. The expansion will make the mine one of Codelco’s biggest divisions. The Andina mine division is made up of two deposits located about 80 km northeast of Santiago, the Rio Blanco copper deposit, mined since 1970 but discovered in 1920, and the open pit Sur Sur deposit.

Europe’s top copper miner, KGHM, is bracing for a drop in profits.  The company announced this week that they are planning on cutting heir 2008 guidance due to dropping demand in some categories for the industrial metal. Looking forward, KGHM’s CEO Miroslaw Krutin anticipates that 2009 will be an even harder year than 2008, as the full effects of shrinking demand weigh on copper’s market value.

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