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Copper May Drop as Strike at Chile's Escondida May End, U.S. Data Weakens
Aug 3,2011 16:49CST
industry news
Source:SMM
Copper dropped in London as a two- week strike at the world's largest mine in Chile may be nearing an end and U.S. consumer spending unexpectedly fell.

Aug. 3 (Bloomberg) –Copper dropped in London as a two- week strike at the world's largest mine in Chile may be nearing an end and U.S. consumer spending unexpectedly fell, deepening concern demand may ease in the second-largest user.

Copper for delivery in three months lost as much as 0.7 percent to $9,615 per metric ton before trading little changed at $9,665 at 2:20 p.m. in Singapore. The metal used to make pipes is also little changed this year after reaching a record $10,190 in February.

Workers and executives at BHP Billiton Ltd.'s Escondida mine are "close" to resolving a pay dispute, and union members will vote on ending the 12-day strike, Marcelo Tapia, a union leader said yesterday. U.S. purchases unexpectedly fell 0.2 percent in June, Commerce Department figures showed yesterday. Crude oil and Asian equities also dropped today.

"After some weak-looking data from the U.S., the risk trade is definitely off,'" Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd., said today by phone from Singapore. "We are seeing the same pattern across the commodities, metals and oil alike."

Copper has declined from the all-time high as the weaker global economic outlook and debt crises in the U.S. and Europe outweighed forecasts for a global shortfall and the impact of disruptions to supply. The world copper market will have a deficit of 670,000 tons this year compared with 39,000 tons last year, according to Barclays Capital.

The Escondida strike, which began on July 21, has cost about 28,000 tons of lost copper-in-concentrate production, according to Barclays Capital. Strikes have also occurred at other mines and grades of ores have been falling, Peter Hickson, a strategist at UBS AG in Hong Kong, said yesterday.

'Very Tight'
"Markets like copper are very tight," Trevethan said. "Chinese consumers are going to come back, and there will be a need to" rebuild stockpiles, he said. Reserves monitored by the Shanghai Futures Exchange have lost 11 percent this year.

The JPMorgan Global Manufacturing PMI Index was at 50.60 in July, the slowest expansion in two years, according to Aug. 1 data. Demand for metals typically tracks production at factories.

"We may be looking at a slower economic recovery," Xin Yi Chen, an analyst at Barclays Capital in Singapore, said by phone today. "This macro-economic indicator made investors nervous."

Nickel declined 0.8 percent to $24,600 per ton in London, and tin lost 0.2 percent to $27,200 per ton. Lead gained 0.3 percent to $2,569.50 per ton, while zinc and aluminum were little changed at $2,439 and $2,580.25 per ton respectively.

Copper for October delivery added 0.2 percent at 72,160 yuan ($11,206) per ton on the Shanghai Futures Exchange.
 

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