Copper Rises Most in Week on Dollar Drop, Chile Strike Threat

NEW YORK, Aug. 13 -- Copper rose the most in more than a week as the dollar fell and workers threatened to strike at a BHP Billiton Ltd. mine in Chile that is the world's largest producer of the metal.

    The dollar fell for a second day against a basket of six major currencies, increasing the appeal of commodities as an alternative. The Federal Reserve said today that it will keep interest rates "exceptionally low" for an extended period. The leader of 7,500 miners at the Escondida mine in Chile said workers will strike if BHP doesn't meet demands to share profits after the current labor contract expires in December.

    "Copper is up because of the slightly weaker dollar and supply concerns, particularly because there may be a strike in Chile," said Ralph Preston, a Heritage West Futures Inc. analyst in San Diego.

    Copper futures for September delivery rose 8.7 cents, or 3.2 percent, to $2.8235 a pound on the Comex division of the New York Mercantile Exchange, the biggest gain since Aug. 3. Prices have doubled this year on speculation that the economy will soon rebound from the recession, boosting demand for metals.

    As long as prices remain above $2.69, copper may rally to $2.99 in coming weeks, Preston said.

    On the London Metal Exchange, copper for delivery in three months jumped $151, or 2.5 percent, to $6,190 a metric ton (2.81 a pound.)

    Rising Demand

    Copper has been buoyed by demand from China, the world's biggest consumer of the metal. The Asian country's imports totaled 406,612 tons in July, down from June's record of 477,217 tons. Inventories of copper monitored by the LME rose today for the first time this week, adding 0.4 percent to 292,400 tons.

    "The next sustainable leg up will have to wait for global stocks to shrink and fresh buying interest from China," Andrey Kryuchenkov, a VTB Capital analyst in London, said in a report.

    Workers at the Escondida mine went on strike for almost a month in 2006 as they fought for a share of copper profit profits after prices rose 40 percent the previous year. A strike at Escondida, and Chile's Spence mine, could disrupt as much as a quarter of Chile's copper production. The country is the world's largest producer.

    Employees "are going to want wages or bonuses that will be reflecting the phenomenal rise in prices," Joel Crane, a commodities analyst at Deutsche Bank AG in New York, said Aug. 7. "They know that the companies are minting it."

    Melbourne-based BHP, the world's largest mining company, earned a record $15.4 billion in 2008. The company said today fiscal second-half profit declined 65 percent to $3.26 billion after the recession curbed prices and metals demand.

    "While demand in developed markets remains constrained, a brighter outlook has emerged recently from some of the developing markets," the company said in a statement.

    Down to $5,000?

    Prices may drop as low as $5,000 a ton on the LME before the end of the Northern Hemisphere's summer, London-based researcher GFMS Ltd. said in a report. Demand should improve in the fourth quarter and prices may rebound to $6,500 or higher before the end of the year, GFMS said.

    Demand in the product markets is improving, said Aurubis, the world's largest maker of copper-wire rods used in cars and electronic appliances.

    "Although the expected recovery in demand has so far been relatively sluggish, an improvement in the market situation for the entire product range is discernible," the Hamburg-based company said.

    Among other LME metals for three-month delivery, aluminum rose 2.8 percent to $1,985 a metric ton, and lead gained 2.6 percent to $1,846 a ton. Nickel increased 0.8 percent to $19,650 a ton, zinc rose 2 percent to $1,851 a ton, and tin rallied 1.4 percent to $14,850 a ton.

    (Source: Bloomberg)