Friday, October 30, 2015

Gold price on knife edge after post-Fed fall

Gold price on knife edge after post-Fed fall

Spooked by Federal Reserve's hawkish stance, hedge funds start liquidating 345 tonnes worth of bullish gold futures positions
Yesterday on the Comex market in New York, gold futures with December delivery dates fell more than $30 an ounce from where it trading just before the Federal Reserve's interest rate announcement. By the end of the day gold had clawed back some of those losses, but on Thursday the metal was being sold off again.
Late afternoon Thursday gold was exchanging hands for $1,145.10 – down more than 3% from $1,183.50 ahead of the Fed statement and a three week low. Higher interest rates boost the value of the dollar and makes gold less attractive as an investment because the metal is not yield-producing.
While the Fed decided to keep interest rates unchanged it changed the language in the statement to suggest a hike in December is more likely. The market had begun to price in an increase only in March 2016 and gold bulls were forced into a retreat.
Failure to hold this level would attract some additional long liquidation as a break below $1,140 could signal a reversal of sentiment
The Fed voted 9 to 1 to leave rates in a range of zero and 0.25% where they have been since December 2008. Interest rates in the world's largest economy has not been raised in more than nine years which played a huge factor in gold's rise to a record $1,909 in September 2011.

Gold hit its highest level since June 22 a fortnight ago, amid fresh indications that a limp US economy may push a rate hike further into the future, but that narrative now seems to no longer apply.
On the technical front gold is also looking vulnerable.
Hedge funds reduced bullish bets to more than five year lows ahead of the September Fed decision, but the hold on rates then forced a change of thinking with large futures speculators or "managed money" playing catch-up as the sentiment towards gold turned.
Hedge funds built up net long positions – bets that gold will be more expensive in future – for five weeks in a row, tripling holdings over the past month.
Last week the  CFTC's weekly Commitment of Traders data showed net longs now stand at 12.2 million ounces (345 tonnes), the highest since February.
That constituted a huge reversal from July and early August when hedge funds entered net short positions for the first time since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.
Ole Hansen, head of commodity strategy at Danish bank Saxo says after yesterday's abrupt reversal the price of gold has so far managed to stay above the next level of support at $1,148 an ounce (only just), but "failure to hold this level would attract some additional long liquidation as a break below $1,140 an ounce could signal a reversal of sentiment":
Gold price on knife edge after post-Fed fall

Wednesday, October 21, 2015

FOMC Policy Decision Matrix Exposed

FOMC Policy Decision Matrix Exposed

FOMC Meeting
Two-day meeting, October 27-28, 2015 

Saturday, October 17, 2015

LME Zinc may recover and average $2,275 a ton in 2016: Deutsche Bank

LME Zinc may recover and average $2,275 a ton in 2016: Deutsche Bank
Deutsche Bank's bull case on zinc had been severely dented over the past three months. 

A strong USD combined with Chinese demand fears has seen a build of shorts on the LME, and prices collapse by $800 a ton since the beginning of May.

Glencore’s bold step of closing a similar amount of capacity is likely to squeeze out short positions, and lead to a deficit market of c.500kt in 2016E. 

This would be the fifth year in a row of zinc deficits, and Deutsche Bank forecasts the zinc price to recover and average $2,275 a ton in 2016E.

However, zinc prices at London Metal Exchange settled down by 0.64% to $1805.50 a ton on Thursday, while inventories down by 1050 tons to 587200 tons.

Wednesday, October 14, 2015

Zinc price rally has further to go

Zinc price rally has further to go
The mood at the metals world's number one annual gathering – LME Week – appears to be one of cautious optimism.
A survey of 400 metals and mining investors polled by Macquarie at the London summit returned a moderately bullish view of the next 12 months for base metals.
Platts quotes Macquarie's head of commodity research Colin Hamilton as saying "despite the ongoing and conspicuous issues for fundamentals across base metals markets, the overall mood was not as bearish as we might have expected":
"While concern over Chinese economic growth and metals demand was clear, the consensus for growth, albeit slower, persisted," he added.
Zinc was the top pick among the delegates with the consensus view that the metal would be trading at $2,000 a tonne in a year's time, up by double digits from today's ruling price.
Glencore may also ride to the rescue of nickel with speculation rife that the Swiss mining and trading giant is on the brink of announcing supply cuts
Glencore said last week it would slash its zinc output by over a third or 500,000 tonnes, most of it in Australia, after the price of the industrial metal fell to a five-year low leading to a 10% jump in the price on Friday.

Copper was also expected to strengthen adding $500 to todays's price around $5,300 over the next year, while tin should continue its good run holding onto its gains around $15,000 a tonne.
Aluminum was considered the worst bet with predictions of a fall to $1,450 a tonne by this time next year.
Last year's favourite, nickel also found no love with forecasts of further losses to $9,650 a tonne compared to today's LME ask of $10,460 a tonne.
But here Glencore may also ride to the rescue with speculation rife that the Swiss mining and trading giant is on the brink of announcing cuts at its operations in Canada, Australia, New Caledonia and elsewhere. Glencore is the world's fifth largest producers of the steelmaking raw material.
During the boom years copper was the top pick among summit attendees for five years in a row before switching to lead and tin in 2013.

Monday, October 12, 2015

Gold price just $15 away from major rally

On Friday, gold bulls were off to the races, spurred by a turnaround in sentiment towards commodity markets and fresh indications that a rise in US interest rates may be further off than previously thought.
On the Comex market in New York, gold futures with December delivery dates traded up as much 1.3% at $1,159.30, the highest since August 21. Gold is up 5% from where it was trading before the US Federal Reserve at its September meeting decided to hold rates steady. The last time rates were hiked was June 2006.
The week before hedge funds more than doubled net longs which now stand at just under 5 million ounces, the highest since April
Gold's leg up on Friday came after Fed minutes released yesterday suggested that the US economy will grow well below historical averages for the rest of the decade. The central bank estimates growth of around 1.7% through 2020 versus average growth of 3.1% over the past 50 years.

The dollar and gold, and bond yields and gold, have strong negative correlations and on Friday the greenback fell against the currencies of its major trading partners while treasury yields fell across the board.
Hedge funds were wrong-footed by the decision to keep interest rates near zero reducing bullish bets to more than five year lows ahead of the Fed decision.
But sentiment has now turned and according to the CFTC's weekly Commitment of Traders datafor the week to October 6 large speculators on Comex – referred to as "managed money" – added nearly a fifth to their bullish positions from the week before.
The week before hedge funds more than doubled net longs which now stand at just under 5 million ounces, the highest since April. Speculators also cut back on short positions – bets that gold could be bought cheaper in the future – reducing overall positions to 7 million ounces, down from record highs above 11 million ounces set in July.
We have argued that the first US rate hike could become a buying opportunity as it would remove the uncertainty that has prevailed for many months
In late July and early August, hedge funds entered bearish positions not seen since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.

Saxo Bank in its quarterly outlook released last week, said the "the eventual recovery in gold hinges on a change in sentiment among paper investors".
The Danish bank pointed out that most of the third-quarter rallies were driven by hedge funds covering short positions, first after the Chinese devaluation and second after the dovish Federal Open Market Committee statement on September 17. Friday's rally, in solid volumes, followed a similar pattern:
"The combination of a dovish Fed, uncertainty about China’s currency policy and the health of the global economy, as well as low investor involvement, may eventually be what triggers or forces a sentiment change. We have argued that the first US rate hike could become a buying opportunity as it would remove the uncertainty that has prevailed for many months. As we still wait for what potentially could be an elusive rate hike, some uncertainty will linger.
"But having seen three robust recoveries within a short period, we sense a change of sentiment is unfolding. Key to this would be a move above gold’s August high at $1,170/oz, which would confirm a floor has been established. We maintain our year-end target of $1,250/oz and only a break below $1,080/oz would bring a change to this outlook."
Click here for Saxo Bank's commodity insights and essential trades for the final quarter of the year.
Gold price just $15 away from major rally

Saturday, October 10, 2015

How Glencore production cut will affect Zinc?

How Glencore production cut will affect Zinc?
LME zinc surged by about 2% to climb above $1,700 per ton, and the most actively-trade zinc contract on the SHFE also rose to around 14,000 yuan per ton after Glencore’s cut news.

Glencore said on Friday it will cut 500,000 tons, around one third of its annual zinc output, of global zinc production due to low prices.

How Glencore’s cut news will affect zinc market?

“Zinc prices, in the short term, will get a boost from the cut news, but its weak fundamentals will not allow a sustainable price rise,” an analyst from Guosen Futures told SMM in the latest interview.

Poor zinc consumption in China, due to a slowing economic growth, is the leading reason behind sluggish zinc prices, the analyst pointed out.

“Weak demand is now in marked contrast to high utilization rates at domestic zinc smelters facing high TCs, especially when a traditionally peak demand season in October also fails to materialize so far this year,” the analyst explained.

The global zinc market is also not in good shape, despite no big rise or even a slight drop in LME zinc inventories, as unreported zinc inventories are estimated to be huge.

Over 500 jobs lost as Glencore suspends zinc operations in Australia

Over 500 jobs lost as Glencore suspends zinc operations in Australia
Glencore will temporarily suspend operations at Lady Loretta and reduce production at George Fisher and McArthur River operations, the company announced on Friday.
ABC News reports that 242 workers will lose their jobs at Lady Loretta Mine while while 224 positions will be lost from George Fisher, and 69 at the McArthur mine.
The closures gave zinc a bump. The Wall Street Journal says zinc rose 6.7% on the London Metal Exchange today.
Before the news, zinc had dwindled to a five year low, dropping to 72 cents USD/lb late last month. The metal had a 52-week high of $1.09 USD/lb.
Glencore plans to reduce annual zinc metal mine production across its operations in Australia, South America and Kazakhstan by approximately 500,000 tonnes or one-third. There was no news on how operations outside of Australia would be impacted.
"Glencore remains positive about the medium and long term outlook for zinc, lead and silver, however we are taking a proactive approach to manage our production in response to current prices," said the company in a statement.
The company said it has invested over $1 billion across our zinc operations, and it will continue to fund several large scale projects at our operations.
The company regrets the closures.
"These changes, although temporary, will unfortunately affect employees at our operations. This decision has not been taken lightly. In the coming days we will engage with all employees and put in place support services to assist our people who may be affected as a result of these changes."
Lady Loretta—a zinc (sedimentary exhalative) deposit, with additional occurrences of copper, lead, and silver—is located in Australia about 140km NNW of Mt Isa. The mine is an underground operation, employing long-hole stoping technology.

Friday, October 9, 2015

Copper mining's deepening costs crisis

Copper mining's deepening costs crisis
GFMS Thomson Reuter's closely watched annual base metals review and outlook contains some stark warnings for copper miners.
The industry has made progress to reduce costs – since the first quarter of 2014 average cash costs have dropped by $303 a tonne according to GFMS calculations.
Over the same period the price of copper is down by $998 a tonne. And since the end of the June quarter of 2015 (the scope of the report) copper is down another $1,000.
It seems unlikely that the pace of cost reduction can improve much from the relatively modest pace of the last few quarters
GFMS says at the August low of $4,888 a tonne (a six-year low visited again at the end of last month) 10% of the industry is losing money on a cash basis.

But consider total costs (a better proxy for sustaining production levels at mines) and 47% of the industry is unprofitable at a 2009 copper price.
While costs have been reduced by 8% since the start of 2014, in Q2 2015 cash costs for the industry actually creeped up fractionally over the first quarter.
The inability of copper miners to make deeper cutbacks was despite a 50% fall in the price of crude oil and a sharp depreciation of producer country currencies against the dollar (on average more than 15% says GFMS) over the period. The usual culprit when it comes to rising costs in copper mining – falling grades – were relatively stable.
And the outlook is not all that rosy for the cost curve to lower much more:
"While cash costs may benefit from the lag in the transmission of lower energy prices, it seems unlikely that the pace of cost reduction can improve much from the relatively modest pace of the last few quarters.
"If copper prices continue to languish, additional cuts in sustaining capital are likely in the coming months, which will clearly impact the future production profile. We expect noise levels to increase in the coming months as the industry announces cuts to mine production and capital budgets, but how much of that translates into mine closures and/or a meaningful reduction in volumes remains to be seen."

Monday, October 5, 2015

Why India Might Finally Begin To Get Its Commodities Game Together

Why India Might Finally Begin To Get Its Commodities Game Together
India is a commodity powerhouse. It is the largest producer or consumer for commodities that range from milk, pulses and spices to gold, edible oils and industrial crops. It is second largest producer of sugar, rice and cotton. And yet, instead of dictating terms, we follow the prices set overseas for them. What stops us from taking our rightful place in the global order? The feebleness of our market.

The power of any market comes from its ability to set the benchmark price that acts as the reference for all other trades around the globe, whether it is London for physical gold or New York for cotton. India's commodity markets have been illiquid, ill-equipped and ill-connected ever since their inception in 2003 due to a combination of outdated laws and ill-informed policymakers.
Now, 12 years later, this is set to change. SEBI has taken over as the new regulator and guardian of the commodity market, which will now be governed by the Securities Contracts (Regulation) Act, 1956, applicable to stock exchanges. India's commodity markets have a fighting chance to emerge from the shadows.
Here are five steps SEBI can take to make it happen.
1. Create policy stability
Commodity exchanges need a conducive ground created by surrounding institutions such as the government, the banking framework and corporate law. Commodity trading has been frequently disrupted by bans and mid-air changes in trading rules. This destroys market confidence despite a strong regulator. As an independent regulator, SEBI should seek a commitment from Central and state governments to adopt transparent and predictable rules for direct interventions, such as changes in trade policies, procurement operations and trading rules. To prevent panicky reactions, it has to rapidly educate the media, politicians, bureaucrats and the public about the role and mechanics of commodity exchanges.
"SEBI has a historic opportunity to create a wide and enduring economic moat around our commodity markets through sophistication and scale."
2.Consolidate volumes by expanding the network
Size begets power. Commodity exchanges benefit from strong "network effects". These mean that more members are better--the more trades exchanges handle, the more liquidity they can provide and the more activity they attract. By connecting hedgers, government companies such as FCI, and farmer bodies, to generate trade volumes that are in multiples of crop production, SEBI can improve price discovery and make the market more efficient.
3. Build scale by allowing better quality of investors and speculators
A large market to which producers, dealers, manufacturers, and speculators converge makes a contract as liquid as a stock certificate or a coupon bond. Allowing banks, mutual funds and large foreign investors to enter the commodity market will improve its risk-insuring function.
4. Connect to overseas markets
Today, no market is an island. In a hyper-connected world, India will only gain if its commodity contracts are listed on overseas exchanges reciprocally so that they are quickly accepted as a reference price.
5. Create a cost advantage
Compared to overseas markets, it is expensive to trade in India. The commodities transaction tax, local state taxes, high brokerage fees and high cost of physical delivery due to poor logistics have made costs a deterrent. SEBI will have to scrutinise each one so that market participants are attracted by favourable terms and remain loyal due to the high cost of switching business away from India.
In 2014-15, 10 out of the top 20 agricultural contracts by volume were traded on exchanges based in China, according to data from the US's Futures Industry Association. CME's Chicago Board of Trade was the leading agricultural futures market outside China. Precious metals are dominated by the Comex gold and silver contracts traded at CME's New York Mercantile Exchange. The Shanghai Futures Exchange is emerging as an important centre for gold and silver trading in Asia.
India has a natural competitive advantage in a wide swathe of this global commodity market. But it remains untapped because little attention has been paid on how to fight competition. SEBI has a historic opportunity to create a wide and enduring economic moat around our commodity markets through sophistication and scale. If it is successful, India--with its 52 million farmers and 1.2 billion consumers--can finally stand up to take its rightful place in the world of food and natural resources.

Govt reviewing capital mkt reform measures

Govt reviewing capital mkt reform measures

A recent report on capital markets by a government appointed panel is being examined by the finance ministry and financial regulators, and some its suggestions could perhaps be incorporated in the upcoming 2016-17 Budget.

The report, by the standing council on international competitiveness of the Indian financial sector, was made public in early September and recommended a number of steps to reform derivatives markets for commodity, equity and currency.

Some of these recommendations include removal of securities transaction tax and stamp duties, especially for futures and options products, clarifying tax treatment in exchange-traded currency derivative markets and avoiding ban on any market segment, participant or product.

The report also suggests allowing access to all foreign participants as long as they meet financial Action task force requirements, clarifying regulatory positions on participatory notes, removing regulatory constraints on banks and mutual funds to participate in commodity futures, uniform KYC norms, internationalising the rupee, and a longer term move to a residence based taxation regime.

Senior government sources said that the finance ministry has asked all financial regulators to suggest which of the numerous suggestions, divided into short-term, medium-term, and long-term timelines, can be implemented. Once the government is in agreement with the likes of Reserve Bank of India and Securities and Exchange Board of India on which reforms can be implemented, these could be included in the Budget, they added.

"The various financial regulators have been asked to review these recommendations and suggest which can be implemented, and some of these cannot be carried out, then why not," said a senior official.

Saturday, October 3, 2015

Number crunching: The impact of China's currency devaluation

In mid-August, China shocked markets by devaluing the yuan.
Today's infographic looks at the impact this had on global currencies using three different time frames:
1 day, 1 week, and 1 month.
Number Crunching: The Impact of China’s Currency Devaluation
In the grand scheme of things, China’s mid-August currency devaluation spree was a drop in the bucket. Since the Financial Crisis, countries have routinely printed money, kept rates pegged artificially low, and found other ways to get temporary competitive advantages with cheaper currency.
While the People’s Bank of China has made some questionable interventions, China’s currency itself has been pegged to the US dollar officially or unofficially since its early history. With the US dollar climbing wildly against most global currencies since mid-2014, the yuan climbed along with it. China’s currency appreciated against all other major Asian currencies, which erased the country’s manufacturing cost advantage and trade surplus. In retrospect, it is almost surprising that they kept the reference rate where it was for this long.
The strong reaction from markets and media was more from the angle that even slightest movement made by China can create a ripple effect on fragile global markets. China, for a better lack of an analogy, is a bull in a china shop. Its economy and currency are seen as important bellwethers and when the PBOC makes an announcement, people listen.
That’s why in mid-summer, markets got volatile in a hurry. China devalued its currency by 1.9% on August 11 and made some smaller changes since then. The country also announced adjustments to how it would calculate its onshore reference rate moving forward.
Today’s infographic looks at the reaction in currency markets in three timeframes after the event: 24 hours, one week, and one month after.
Some currencies, like the euro, appreciated against the Chinese Renminbi right away and maintained that momentum. The euro went up 2.06% in the first day, and then continued to appreciate to 5.73% by the end of 30 days. Others swung back and forth wildly: at first the South African rand was up 0.71%, but then it ended as the biggest loser against the yuan at -4.24% over the course of a month.
Despite the mixed reaction from different currency markets, the reason China did this was clear. The country wanted to promote convergence in its onshore and offshore rates, and it has also been trying to woo the IMF for some time to be included in the IMF’s basket of reserve currencies called Special Drawing Rights. The latter move is a part of China’s posturing to eventually better internationalize the yuan.
As a side benefit of the devaluation, China also gets temporary relief in promoting exports at a cheaper price – though this will only last until the next country takes action in the game of currency war hot potato.
Original graphic by: Inovance

Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt

Earlier today, Macquarie released a must-read report titled "Further deterioration in China’s corporate debt coverage", in which the Australian bank looks at the Chinese corporate debt bubble (a topic familiar to our readers since 2012) however not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with "uncovered debt", or those which can't even cover a full year of interest expense with profit.
The report's centerprice chart is impressive. It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would write it, have an EBIT/Interest < 1.0x.
As Macquarie notes, looking at the entire universe of CNY22 trillion in corporate debt, the "percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample."
Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt
To be sure, both the size (the gargantuan CNY22 trillion) and the deteriorating quality (the surge in "uncovered debt" companies) of cash flows, was generally known.
What wasn't known were the specifics of just how severe this bubble deterioration was for the most critical for China, in the current deflationary bust, commodity sector.
We now know, and the answer is truly terrifying.
Macquarie lays it out in just three charts.
First, it shows the "debt-coverage" curve for commodity companies as of 2007. One will note that not only is there virtually no commodity sector debt to discuss, at not even CNY1 trillion in debt, but virtually every company could comfortably cover their interest expense with existing cash flow: only 4 companies - all in the cement sector - had "uncovered debt" 8 years ago.
Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt
Fast forward to 2013 when things get bad, as about a third of all corporations are now unable to cover their annual interest expense, even as the total addressable corporate debt has soared to CNY4 trillion for just the commodity sector.
Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt
And then in 2014, everything just falls apart. Quote Macquarie, "more than half of the cumulative debt in this sector was EBIT-uncovered in 2014, and all sub-sectors have their share in the uncovered part, particularly for base metals (the big gray bar on the right stands for Chalco), coal, and steel."
Compared with the situation in 2013, while almost all sub-sectors did worse in 2014, but things appear to have worsened faster for coal companies as more red bars have moved beyond the 100% critical level for EBIT-coverage.
It means that last year about CNY2 trillion in debt was in danger of imminent default.
Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt
The situation since than has dramatically deteriorated.
So are we now? Macquarie again: "Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime."
In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can't even generate the cash to pay down the interest on their debt, let alone fund repayments.
We fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.

Friday, October 2, 2015

DAX Reverses Month-End Ramp, Suffers Worst Start-To-Q4 Since 2009

Germany's DAX has given back all of yesterday's exuberant month-end gains and more to suffer the worst start to Q4 since 2009 (and actually worse than 2007 and 2008)...
Early hope collapsed into reality...

DAX Reverses Month-End Ramp, Suffers Worst Start-To-Q4 Since 2009

Copper, Crude, Credit Crumble As Stocks, Bond Yields Tumble

Copper, Crude, Credit Crumble As Stocks, Bond Yields Tumble

Commodities terrible quarter in just one chart

Commodities terrible quarter in just one chart
Unless you were hiding out in rough rice or lean hogs, commodities were not your friend in the third quarter of 2015.
GoldCore compiled three-month relative performance of commodities with data from
Worries out of Asia hurt commodities. China is rebalancing, emphasising consumption over investment. It's stock market gyrations also dragged down metals. The Shanghai Composite Index falling from the peak of 5,166 in mid-June to 3,038 at the end of September.

Thursday, October 1, 2015

Copper price surges on South America supply cuts

Copper price surges on South America supply cuts
On Wednesday copper futures staged a comeback from six year lows hit earlier in the week as supply disruptions from top producing countries Chile and Peru lift sentiment in beaten down sector.
On the Comex market in New York copper for delivery in December surged as much as 4.7% to a session high of $2.3575 or $5,200 a tonne. Today's advance lifted the red metal out of bear territory for 2015, but at a more than 17% drop since December 31 following a 16% retreat in 2014, no-one's celebrating a bottom yet.
Today's big jump in heavy volume came after news from top producing country Chile.  Output at one of the world's largest copper mines, Collahuasi, will be cut by 30,000 tonnes due to current market conditions.
The mine, owned by Anglo American and Glencore produced 470,000 tonnes of copper in 2014, roughly 2% of global output. Earlier this month Glencore announced it's idling mines in Zambia and the DRC that would remove more than 400,000 from the market.
Also on Tuesday Peru declared a state of emergency in the area around the Las Bambas mine after clashes between police and protesters left four people dead and 16 seriously injured.
Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata
Las Bambas is majority owned by China's Minmetals and the 400,000 tonnes per year mine is set enter production in January next year. Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata.

New mines in Peru coming on stream this year and 2016 would double production to 2.8 million tonnes, placing the Peru in second place globally behind Chile.
Copper's move higher gave a bit of a lift to beaten down copper stocks with Glencore's (LON:GLEN) jumping 14% as it continues to recover from a more than 30% fall in London in Monday. Anglo American (LON:AAL) shares also also traded up in New York but year to date declines at the diversified miner remain more than 50%.
Freeport-McMoRan (NYSE:FCX), which vies with Chile's state-owned Codelco as the world number one copper miner in terms of output, was trading 5% higher in early-afternoon dealings but investors in the the Phoenix Arizona based company are nursing a 59% decline since the start of the year. Freeport announced a month ago it is cutting in half output at is El Abra mine in Chile and idling two US mines.
Copper price surges on South America supply cuts

The copper industry has a long history of these supply-side surprises.
Typical disruptions associated with adverse weather (Freeport has predicted lower output at the massive Grasberg mine in Indonesia related to El Niño weather patterns), technical problems, power shortages and labour activity coupled with falling grades and dirty concentrates at old mines (especially true in Chile) make forecasting a tough proposition.
The copper industry has a long history of these supply-side surprises
Add to those factors project deferrals, commissioning delays, slower ramp-ups, mothballing and downsizing of mine plans due to the declining price environment of the last two-three years and it becomes easier to understand why forecasts are all over the place.

Last week Goldman Sachs predicted the slump in the copper price could last years due to the slowdown in China and that prices will probably drop to $4,800 a metric ton by the end of December and $4,500 at the end of next year as the market suffers from oversupply of 530,000 tonnes next year 2016 rising through 2019 to reach 657,000 tonnes oversupply.
On the opposing side independent research house Capital Economics forecasts a strong pickup in the price of copper towards the end the year on the back of lower than expected mine supply growth and output disruptions.
Senior commodities economist Caroline Bain says Chile’s recent earthquake highlights these risk. Although output was only interrupted briefly, the earthquake and tsunami that struck the South American nation halted operations at the Los Pelambres and Andina mines, which together produce  600,000 tonnes of copper.
Apart from the effects of El Niño (low rainfall is behind the Grasberg output reduction, but on the other side of the ocean the occurrence causes flooding), ongoing strikes and protests, Bain also points to relatively low warehouse inventories which in the case of LME stocks represent only 2–3 weeks of annual consumption for the bullish case.
The house view at Capital Economics is for the price of copper to reach US$6,250 per tonne by end-year, rising to $7,000 by end-2016.