Antamina workers return to labor

The strike, which was initiated by the union workers working in the mine, demanding for better working conditions and also greater wage. Just like the previous strike, which lasted for about 2 weeks, the second strike with the same demands was also declared illegal by the authorities of the mine.

The first strike by the union workers was inaugurated on November 11th and the strike lasted till November 30th. The authorities of the mine, during the strike stated that the operations at the mine is not affected by the strike. But the union workers kept on insisting that, the mine has been highly affected by the strike. They claimed that the output has affected almost 60 percent reduction due to the strike.

From the total number of workers at the Antamina copper mine, about 1,630 workers are the members of the union. The authorities of the mine, produced the media with a letter, which they claim is to be from the head of union workers. The letter claims that, the workers are ending the strike and will soon return to work.

The stakeholders of the company are, Glencore Xstrata, Mitsubishi Corp, and also BHP Billiton. The BHP Billiton, holds the  major stake of the Peru based copper and zinc mine, followed by Glencore Xstrata, and then Mitsubishi Corp. 

What Do Falling Oil Prices Mean for Copper?

Oil prices have taken a dive this year, and far from occurring in a vacuum, that poor performance is likely to have a ripple effect on other commodities. Copper, which has been sitting below the $3 mark lately, is just one metal that could be vulnerable to the effects of weak oil prices.

As a recent article from Bloomberg explains, energy needs make up as much as 50 percent of the production costs for metals. That means cheaper oil should lead to lower production costs, which in turn should allow copper producers to hold up a bit better against falling prices.

Michael Haigh, head of commodities research at SocGen, told the publication, “[t]here’s been a structural change in oil, and there’s more to come. This will also ripple through other commodity markets, in some cases directly, and others indirectly.”

Remaining profitable

The ability to stay resilient under difficult conditions isn’t necessarily a bad thing. Although seeing copper at $2.90 might be uncomfortable for many base metals investors, it’s worth noting that plenty of copper projects will still stay afloat at those prices.

Back at the start of September — when oil prices were still a little higher than they are now — Stefan Ioannou of Haywood Securities told Copper Investing News that even higher-cost producers were still managing to stay profitable at $3 copper, and suggested that copper “would probably have to drop below the $2.50 range before impacting existing production associated with the upper end of the copper cash cost curve.”

Copper supply and demand

However, there’s another side to that issue that’s worth mentioning — falling costs can create a supply problem. In theory, lower prices for any commodity should shut out higher-cost producers, restricting supply and eventually driving prices up. However, if production costs keep going down as well, and demand doesn’t increase, all that supply stays on the market, and the bottom keeps moving lower and lower. That’s what’s happened with coal, according to Joe Aldina of Wood Mackenzie, who gives a good overview of the issue here.

Still, although some have pointed to a growing copper surplus, others are not so sure. While copper prices certainly haven’t had a breakout year, issues such as ramp up delays, growing impurities in copper concentrate and demand indicators are all factors worth considering.

Certainly, the teams at Thomson Reuters GFMS and the International Copper Study Group (ICSG) are still predicting a surplus in the near term, but those positive on copper are quick to note that the ICSG has drastically cut its forecast. In any case, investors will certainly be keeping an eye out to see how cheap oil will affect copper miners.

As of 5:15 p.m. EST on Wednesday, copper was trading at $2.895 per pound.

Turn a 200kt copper surplus into 1.6mt deficit in 3 easy slides

Glencore says 2015 supply forecasts are way too optimistic and the Swiss giant has the charts and tables to prove it

The copper industry has a long history of supply disruptions.

Typical disruptions associated with adverse weather, technical problems, power shortages or labour activity make forecasting a tough proposition.

To these variables add more recent factors affecting future supply which includes the fall in the price to near four-year lows which makes it difficult for miners to raise development finance (or raise wages for that matter).

That leads to project deferrals, commissioning delays and changes to mine plans and partly explains why the International Copper Study Group's benchmark forecast for 2014 swung from a 400,000 tonne surplus in April to a 300,000 tonne shortage just six months later.

While there's consensus for a small deficit this year, in 2015 even the most skeptical of analysts predict an oversupplied market and a concomitant fall in the price.

Not so fast says Telis Mistakidis, Glencore's copper chief.

Glencore is the world's third largest global mined copper producer and the world’s largest copper supplier.

The Swiss company relies on copper for 38% of its earnings (vs 20% at BHP Billiton and only 10% at Rio Tinto) so it has a lot riding on the outlook for the red metal.

Glencore's presentation to investors in London contained these three slides that shows just how vulnerable the copper supply chain can be:

Written by Frik Els

Workers at Peru's top copper mine to start new strike Wednesday -union

Workers at Peru's biggest copper and zinc mine, Antamina, will start a new indefinite strike on Wednesday to continue pushing for a bonus and other benefits, union leader Jorge Juarez said.

The union ended a 19-day strike on Nov. 30 after Peru's work authority declared it illegal. The mine said the stoppage did not affect production that had been running at around 30,000 tonnes per month.

BHP Billiton and Glencore Xstrata each have 33.75 percent stakes in Antamina. Teck Resources holds 22.5 percent and Mitsubishi Corp 10 percent.

"We are going to start the strike at 00:00 Wednesday (0500 GMT) for the same reasons as the previous strike," said Juarez, the secretary general of the SUTRACOMASA union.

Unionized workers hoped to secure a bonus to offset shrinking proceeds from a revenue-sharing agreement and other benefits as production slips on lower ore grades.

Antamina urged the union to reconsider staging another stoppage.

"The strike it led nearly two weeks ago only hurt the workers, whose salaries had to be reduced as a result of the action," the company said in an emailed statement.

Antamina has said it will probably produce about 336,000 tonnes of the red metal this year, down 27 percent from 2013. 

Antamina, in the Peruvian highlands region Ancash, produces about 30 percent of Peru's copper and 20 percent of its zinc. Peru is the world's third largest copper producer.

Copper Market: ICSG expects surplus in 2015

After five years in a row of deficits, the copper market should show a production surplus in 2015, according to The International Copper Study Group.

The ICSG forecasts a deficit of refined copper this year of about 270,000 tons, before swinging to a surplus next year of an estimated 390,000 tons. In April the ICSG had forecast a surplus in 2014 of 400,000 tons.

But “operational failures combined with delays in ramp-up production and start-up of new mines, are leading to lower than anticipated growth,” the ICSG stated in its Copper Market Forecast 2014-2015 released Oct. 15 after a two-day meeting at the beginning of the week in Lisbon, Portugal.

After a growth rate of 8% in 2013, world mine production of the metal is expected to grow by about 3% year-on-year in 2014 to 18.6 million tons, and by about 7% in 2015, ICSG says.

It expects strong growth in world mine production next year “owing to additional output from expansions and new mine projects” and says “most of the new production is expected to be in the form of copper in concentrate.”

ICSG forecasts world refined copper production is likely to increase by about 5% year-on-year to 22.1 million tons in 2014 and by a further 4% to 23.1 million tons in 2015. The increases are “mainly supported by expanded capacity at electrolytic plants in China (and to a lesser extent from expanded SX-EW capacity in Africa).”

Copper decline as demand in China slumps

The analysts confirm that, the decline will remain as it is or move further downward for at least 10 weeks, which will be noted as the lowest since, and the farthest decline since 2013 February.  The value of copper dugged down by 6.6 percent in the month November, and was the highest decline in the value of the metal for the last  17 months. The investors are spreading out, the weak demand for the metal in China, where the  economists have already noted down the weakest expansion since the year 1990.

China is the main consumer of copper, and therefore the decline in demand from China will harshly  affect the commodity. According to the analysts, the decline in demand for copper in China is about to grow further, deeper, and will increase the chances for future decline in the value of the  metal.

The economy of Utah, for a large extend, always depended on copper, for more than a century, as the country  depends on the ore from one of the world’s largest open pit copper mines, Bingham Canyon Mine, owned by Kennecott. 

‘Dr Copper Theory’; right or wrong?

Before the  market closed down last week, the ratings showed that, metal has sledged down to a four and a half year lower sides, but at the beginning of this week, copper is giving a bit of hope in the market. But for now the value of copper as one of the important industrial metal, has plunged down by 9 percent, and this is where a situation comes that, the ‘Dr Copper Theory” becomes a warning, for some of the investors, regarding where the stock is going.

According to this honored theory present in the market, the metal; copper has an ability to sense the economic turning point on the globe, and hence could also measure the health of the stock market rally. This is because copper is a boundless metal, which is being used in homes, power industries, and many other forms of industries. So when the price of copper is falling down, then it means that the whole financial assets are being affected.

George Gero, based on RBC Capital Markets commented that, as the metal has limitless uses in the industry, it can be said to be an indicator of the economy. And therefore the decline in the value of copper, will in turn raises concerns regarding the whole financial sector.

Even when saying so, Chris Kimble based on Kimple Charting Solutions, stated that, the copper price has been slowing down for the last few years but the equities have been climbing up swiftly. Then, as usual the question arises, is the ‘Dr Copper theory’ effective?

Calling for a Copper Surplus? Not So Fast

When it comes to the copper market, analysts are always looking at whether there will be a surplus or a deficit. Of late, many have been calling for a continued surplus, including Thomson Reuters GFMS, which in October released an update to its 2014 copper survey, suggesting that it is unlikely the market will shift into deficit in 2015. Likewise, though the International Copper Study Group (ICSG) has revised its copper supply-usage forecast down substantially, the group is still definitely calling for a surplus.

But as with most things, there is always a flip side. Indeed, there are analysts who argue that the copper market will face a deficit sooner than many think.

Lower LME stocks

The Financial Times reported on October 28 that copper stocks at London Metal Exchange (LME) warehouses have fallen by 55 percent this year, hitting 161,050 tonnes, or about three days’ worth of global consumption.

To be fair, that figure alone does not signify a copper deficit. As Haywood Securities analyst Stefan Ioannou has pointed out, the LME may be the most transparent inventory, but it’s just one piece of the much larger copper market pie.

However, the exchange is still a valuable indicator when looking at the copper market, especially when one buyer (rumored to be London’s Red Kite Group) appears to be holding 50 to 80 percent of LME copper. In other words, it looks as if there are important players making strategic decisions to purchase copper of late, and it’s worth considering whether a prediction for a tight market is driving those decisions.

China (still) stockpiling

Furthermore, it appears that China’s State Reserves Bureau (SRB) is still stockpiling copper. After buying 200,000 tonnes of copper in March and April, when copper was at its weakest price in years, the Bureau recently placed orders for 150,000 to 200,000 tonnes of copper cathode, Reuters reported. The copper is set to be delivered in the final quarter of 2014 and at the start of 2015.

Reuters columnist Andy Home notes that its difficult to pin down exactly how much copper the SRB buys, and that the Bureau’s practice of rotating out older copper stocks could put a dent in this year’s estimated purchases of 700,000 tonnes. However, despite concerns about slowing economic growth from China, the writer suggests that SRB activity could mean the country has no intention to stop importing copper.

What well-stocked SRB warehouses might mean for the copper price is another consideration, since stockpiled copper can’t be “consumed” by industry in the traditional sense. Still, the Bureau’s buying is an important indicator of demand.

Supply delays

Furthermore, expected ramp ups at some copper mines have seen delays this year, and exports from Freeport-McMoRan Copper & Gold (NYSE:FCX) and Newmont Mining’s (NYSE:NEM) Indonesia operations were briefly stopped due to changes in concentrate export rules. While an October GFMS update points to producers regaining some of the momentum they lost in the first half of the year, the Times notes that increased mine supply has not led to a refined copper surplus. That’s due to raw material bottlenecks caused partly by the situation in Indonesia and partly by a lack of smelting capacity in China.

Rising impurities such as arsenic are also causing problems, since it’s difficult for smelters to process the material. To solve the problem, producers often blend those concentrates with purer material, creating even more demand – for the right kind of copper.

What’s next?

The ICSG has brought its prediction for a 595,000-tonne copper surplus in 2014 down to 393,000 tonnes on the back of higher apparent copper usage in China. Echoing that sentiment, the team at Thomson Reuters predicts that LME copper will average $6,500 per tonne for the fourth quarter, declining to $6,200 per tonne in 2015.

However, not all in the copper space are in agreement on that front: while Ioannou also does not see a copper deficit next year, he sees copper prices holding higher in comparison to GFMS predictions, and Andy Home has suggested that a deficit could come even sooner.

To be sure, copper investors will be keeping an eye out to see whether Home is right. Although the writer admits that his bullish thoughts “might seem premature,” he points out that others – including China’s SRB – appear to be looking at a tighter market, and that’s certainly worth taking note of.

Bank of America Merrill Lynch sees Copper to avg $6,939/MT in 2015

Bank of America Merrill Lynch looks for copper prices to average $6,939 a metric ton during 2015 and the red metal demand to expand 4.1% in 2015.

According to BAML, there are signs of global economic growth stabilizing, led by emerging markets, including China. Europe is also steadying, while the U.S. and U.K. have held up.

Considering BAML core view that copper is a trade on global rather than just Chinese growth, we believe the macroeconomic backdrop should be supportive to prices into the first quarter.

In China, an end to destocking in the private sector should push imports above the levels seen during the summer. And, while analysts look for increases in mine supply, BAML does not expect this to be enough to cause a glut.

The biggest percentage increase in concentrates occurred in 2013 and is always long behind us. BAML looks for a supply surplus of 101,000 metric tons this year, declining to just 15,000 tons in 2015.

“Putting it all together, we believe that copper is unlikely to break out of recent ranges, yet we advocate a tactical long position in copper as recent apprehension over the global macro economy and China subsides moving into 2015,” analyst with BAML added.

Workers at Antamina continues with indefinite strike

The union leader of the mine workers, stated that, the union is not planning to  dispose the strike for further negotiation with the management. At the present Jorge Juarez, is appointed as the secretary general of the workers union, SUTRACOMASA

The union stated that, the workers are planning to halt their works and demand for bonus, as the company’s agreement of profit sharing was violated with the decline in copper production. The strike, which was intiated by the workers are becoming a threat to the copper production  in Antamina, which produces over 30,000 tonnes of copper per month.

After the meeting with the management the Secretary of SUTRACOMASA, Juarez, stated the negotiation meeting reached nowhere, hence the union has decided to go on with their plan of the strike.

In a statement, the Vice President for Human Resources and Safety, at Antamina, Silvio Brigneti stated that, the workers are  demanding for the needs which cannot be fulfilled and accepted. He also added that, they have to understand the matter and move forward to restart the production.

The company stated that the profit sharing agreement with workers and the company has not been violated but had to be put on a temporary halt due to the decline in copper production as well as the lower copper prices. 

Peru trims its view of copper output in 2014, 2015

Peru will likely produce less copper this year and next than the government had forecast as big new projects face delays and output from the country's top producer has slid on lower ore grades.

Deputy Mines Minister Guillermo Shinno said on Tuesday that Peru's copper production in 2014 is now on track to rise just slightly from last year's 1.375 million tonnes.

"This year we'll reach 1.4 million tonnes of copper, almost the same as last year," Shinno told a news conference.

Next year the Andean country's copper output will rise to between 1.7 million and 1.8 million tonnes, Shinno said.

In September, Shinno said copper production in Peru would likely rise to 1.95 million tonnes in 2015 after coming in at about 1.5 million tonnes this year.

Shinno also said on Tuesday that Peru's gold production is set to fall by about 18 percent this year to around 4 million ounces, largely in line with his previous forecast.

So far this year, Peru's copper production has increased by 2.6 percent, while gold output has dropped 14.8 percent. 

A slower-than-expected ramp-up at Chinalco Mining Corp's large Toromocho mine has clouded the outlook for increases in copper production.

And a planned strike at the country's biggest copper producer, Antamina, now threatens to halt the mine's output of around 30,000 tonnes per month.

Antamina has already been struggling through a phase of lower ore grades. Production at the mine fell by 34 percent in September and 14 percent in the first eight months of 2014 from the same periods a year earlier.

Antamina is owned by BHP Billiton , Glencore Xstrata , Teck and Mitsubishi Corp .

"Next year we will again have Antamina with its usual production level," Shinno said. "They are going to produce 30 percent more compared to this year."

But a major boost in copper production from MMG Ltd's  Las Bambas project in southern Peru will have to wait until 2016. Last month, the Chinese-owned miner pushed back the start date for Las Bambas to early 2016 from the second half of 2015.

Peru is the world's third biggest copper and silver producer and the fifth biggest gold miner.

Freeport Indonesia union cancels planned one-month strike

Workers at Freeport-McMoRan Inc's Indonesian copper mine have cancelled a planned one-month strike due to start next week, a union official said on Friday, after reaching an agreement with the company's management following two days of talks.

Three Freeport unions representing almost 11,000 workers had agreed to take strike action from Nov.6 until Dec. 6, demanding changes to the local management following the death of four workers in a Sept. 27 accident.

"Strike cancelled," a union spokesman Juli Parorrongan told Reuters.

"Through intensive, informative and constructive dialogue, we successfully reached a win-win solution for everyone," senior union official Sudiro said in a statement. "Our goal is to create a safe and productive work place at Freeport Indonesia for all workers."

Freeport Indonesia, which employs around 24,000 workers, did not immediately respond to a request for comment.

Production halts in mines might lead to supply deficit of copper

According to the estimations, about 84,000 tonnes of copper supply would disappear by the initiation of the strikes in the copper mines, by the end of the year 2014. According to David Charles, a mining analyst at Dundee Capital Markets, stated that even though the price of copper is staying low at 9 percent decline at the LME, the surplus will be long eliminated by the end of the year 2014, as the supply deficit, yet has to be materialized.

A rise in  the price of copper is to be extended to the year, 2015, as the demand for copper in the construction industry, household sector as well as in the power sector of China remains to be strong.

At the beginning of the  year 2014, according to the analysts’ forecast, there ought to have a supply surplus of about 600,000 tonnes of copper, but if the strikes held by the workers in the mine work out well, the surplus will turn out to be a small one of about 70,000 tonnes, or hopefully there would be a deficit in the global market.

Copper hits two-week high on supply disruption worries

* Strike action looms in Indonesia, Peru
* Nickel surges over 5 percent to hit one week high of $15,550/T

(Reuters) - Copper prices hit a two-week high on Tuesday as the outlook for rising supply was tarnished by looming strikes at two key mines while expectations of higher demand from top consumer China helped reinforce optimism.

Three-month copper on the London Metal Exchange

(LME) ended at $6,795 a tonne, up 0.97 percent, having earlier touched a two-week high of $6,797.75 a tonne.

Workers at Freeport-McMoRan's Indonesian copper mine will hold a one-month strike from next week and those at Peru's biggest copper mine, Antamina, plan to start an indefinite strike from Nov. 10. 

In a quarterly profit release, Freeport said a large percentage of Grasberg open pit operators had not reported for scheduled shifts, resulting in lower production from its open pit copper mine in October. It also reported a 32 percent drop in quarterly profit, hurt by lower metals prices. 

Analysts polled by Reuters expect the copper market to show a surplus this year and to post an even bigger surplus in 2015, but that view is threatened by events such as strikes and delays. 

"There's a bit of stability led by the copper supply disruptions and we're getting a bit of a bounce in prices," said Robin Bhar, an analyst at Societe Generale.

"But we are still expecting more downside to come for copper rather than upside. The wall of supply is still coming. That has not been delayed or cancelled," he said.

The metal used in power and construction is down more than 8 percent this year, and has gained just 1.3 percent this month, partly on expectations of a big surplus forming in the market.

"We hear what the producers are saying in terms of what they're planning to put out, but it's the unforeseen factors such as industrial action that create (uncertainty), as we have seen in the past few days, and that's providing a little bit of support," said analyst James Glenn of NAB in Melbourne.

"Plus the physical market at the moment is still quite tight so any signs of better demand is going to see the price go up."

On the demand side, Chinese firms showed slight improvement with industrial profits in September up 0.4 percent from a year earlier, reversing a 0.6 percent annual decline in August, data showed on Tuesday.

Markets are now eyeing the U.S. Federal Reserve's policy meeting this week, where it will likely reinforce its stated willingness to wait a long time before raising rates after a volatile month in financial markets that saw some measures of inflation expectations drop worryingly low

In other metals, nickel surged 5.25 percent to end at $15,550 - its highest in about a week, as investors reassessed the buy-side case given key supplier Indonesia's ore export ban.

Nickel has posted losses for the last seven weeks running as Philippines supply to China rose, partly filling the gap caused by an Indonesia ore export ban that sent price up by some 40 percent in the first half.

Tin ended up 1.66 percent at $19,875 a tonne and zinc closed up 0.04 percent at $2,256 a tonne.

Aluminium ended up 0.71 percent at $1,998 a tonne, and lead closed up 0.94 percent at $2,033 a tonne.

Freeport Indonesia union plans one-month strike at copper mine

Workers at Freeport-McMoRan Inc's giant Indonesian copper mine plan to go on strike for a month from next week, a union official said on Monday, after the company failed to make changes to local management following a fatal accident.

Earlier this month, hundreds of angry protesters blocked access for two days to the open-pit area of the Grasberg complex, where production was temporarily suspended following the death of four workers on Sept. 27.

The remote copper mine is one of the largest in the world and any prolonged disruption could support prices of the metal , which have fallen almost 10 percent this year.

Three Freeport unions have agreed to take strike action from Nov. 6 until Dec. 6 to pursue demands including the appointment of new managers, Albar Sabang, a senior official at a Freeport union, told Reuters. Sabang's union has about 9,100 members.

"The purpose of the strike is of course to stop production so there will be pressure for the Freeport Indonesia management to answer to our demands," Sabang told Reuters by text message.

Freeport, which employs around 24,000 workers, declined to comment on Monday. About three-quarters of the workforce belong to a union.

Relations between Freeport and the unions have been strained in recent years following a three-month strike in late 2011 as well as a series of minor disputes.

In addition to the four workers killed in the collision involving a truck last month, 28 people were killed after a tunnel collapsed in May last year.

Indonesia's mine ministry investigated the Sept. 27 accident and asked the company to introduce changes to safety procedures and policies before allowing open-pit mining to resume.

Three weeks ago, the Freeport Indonesia union warned of fresh protests, blockades or strike action if workers' safety concerns and other demands were ignored.

A union letter detailing the planned strike was sent on Oct. 23 to Freeport's local CEO, Rozik Soetjipto, the chief executive and chairman of the Arizona-based firm and various government officials.

Under normal conditions, the Grasberg open pit produces around 140,000 tonnes of copper ore per day and the underground mine about 80,000 tonnes.

Although the copper market is broadly expected to be in surplus next year, one trader said, an extended strike could tighten regional concentrate supply, with the market not far from balanced at the moment. Freeport's concentrate is low in impurities.

Freeport, one of the biggest tax payers in Southeast Asia's largest economy, only recently resolved a tax dispute with the government that halted exports for months and frayed relations.

Should the Freeport strike go ahead as planned, it may be the first big test for Indonesia's newly appointed energy and mineral resources minister, Sudirman Said.

Copper Surges After Report Mysterious London Buyer Has Cornered Up To 90% Of Market

Copper prices are surging this morning (in the face of Goldman's recent warnings of a plunge), jumping 4 handles apparently on the heels of a WSJ story in which LME admits that a single buyer has snapped up more than half the copper held in London Metal Exchange warehouses, giving it control over a crucial source of supply and raising concerns among traders about the potential for higher prices. What is more remarkable is, as WSJ reports, on several occasions in the last month, this buyer held as much as 90% of the world’s copper stored in LME-licensed warehouses. Though no confirmation has been given traders suggest the firm cornering the copper market is Red Kite Group, a London hedge-fund manager that focuses on metals trading.

As The WSJ reports,

A single firm has owned at least 50% of the copper in LME-licensed warehouses for much of the last four months. Accumulating such a dominant position became easier in June because the amount of metal under the exchange’s watch had plummeted, as had prices. The warehouses have held less than 160,000 tons of copper since mid-June, compared with more than 360,000 tons at the start of the year. Some analysts say copper production is running behind demand, forcing some users to draw on stockpiles in LME-licensed warehouses.

On several occasions in the last month, this buyer held as much as 90% of the world’s copper stored in LME-licensed warehouses, equal to about 140,000 tons, or enough to make the copper parts of the Statue of Liberty more than 1,700 times. As of Wednesday, the buyer owned between 50% and 80% of copper held in warehouses, according to the most recent exchange data.

Rumors are that it is Red Kite...

Established in 2004, Red Kite is now run by two of its founding partners, Michael Farmer and David Lilley, both alumni of the German industrial conglomerate Metallgesellschaft AG, which collapsed in 1993. The fund is known for its bold and extremely profitable trades involving copper, as well as other metals. Red Kite Group manages $2.3 billion, according to its website.

Red Kite declined to comment.

The London Metal Exchange, owned by Hong Kong Exchanges & Clearing Ltd. , doesn’t limit how much metal a single trader may hold in its warehouses, and says that it has mechanisms in place to prevent market squeezes—a situation in which holders of a large share of the supplies use their position to jack up prices.

Some traders say the concentration of so much copper under one firm’s control is already driving up prices. It costs about $72 more per ton to buy copper for delivery today than for delivery in three months.

“There’s no reason for anyone to be holding 70% of the stocks of the commodity,”said Jessica Fung, head of Commodities Metals at BMO Capital Markets.

*  *  *

As Metal Bulletin notes,

The Red Kite metals fund posted returns of just over 50% in 2013 after a well-timed switch from a short to a long position in the copper market around the time that prices posted their lows for the year, well-placed sources told Metal Bulletin.

Simply put, they were the market (buying it up in hopes to corner the market)...

The long position delivered returns as copper prices rebounded to finish the year up nearly $700 from its 2013 low, but Red Kite also made strong returns on physical inventory and spreads as copper premiums jumped in Asia and the LME forward curve moved into backwardation, market sources told Metal Bulletin.

"The Red Kite switch was definitely up there as one of the big trades of the year; the volumes were huge," a source active in the copper market told Metal Bulletin.

At the time, sell-side analysts in particular were turning strongly bearish on the copper market, reacting in part to lagged evidence of the slowdown in demand that prompted Red Kite to run short positions around the start of the year, sources said.

"Good data is very hard to come by in the copper market, and at the time I think a lot of people were trading looking in the rear-view mirror," one observer of the company told Metal Bulletin.

*  *  *
Summing it all up - Is Red Kite the next Amaranth?

*  *  *

The irony of someone cornering another metals market a week after the death of Nelson Bunker Hunt is not lost on us.

On The Coming Collapse Of Copper

18 months ago we first brought the world's attention to the end of what has now been exposed as among the largest ponzi schemes in history - the Chinese Commodity Financing Deals (CCFDs) - pointing out how this meant commodities like copper were likely to come under pressure as firms liquidate what minimal holdings they had (and sell out futures hedges) to manage the risk of unwinds in these quasi-collateralized deals. Since then, copper prices have indeed plunged, as has global growth expectations and global bond yields as a realization that 'demand' implied by previous prices was entirely artificial. Now, as Goldman notes, the real world is catching up (or down) to the reality of mal-investment and how copper is set to drop notably further...

As Goldman Sach's Max Layton,

Metals and mining commodities – including the base and bulk commodities, steel and cement – are highly exposed to a slowdown in the Chinese property, with over 40% of Chinese demand for cement and copper in particular consumed in the construction sector. The recent slowdown in Chinese property sales, prices and early-cycle new starts has most impacted physical demand for (and sentiment towards) commodities exposed to the earlier stages of China’s construction cycle – steel and iron ore – which have underperformed commodities more exposed to latter stages of the construction cycle, such as copper.However, as the recent slowdown in new starts flows through to late-cycle, copper-intensive construction completions, we expect copper to come under further pressure.

Understanding the construction cycle and commodity demand

The property development timeline for a typical Chinese building (such as an apartment building) from new start to property completion takes around 18 to 24 months. An “early-cycle” construction phase can be characterized as a period with strong new starts, relatively weak completions, and falling inventories (associated with higher sales). Conversely, “late-cycle” construction phases are typically associated with weak new starts, relatively strong completions, and rising/and or high property inventories (associated with weak sales). The intensity of basic material consumption varies significantly across these phases: consumption of steel and steel-making raw material (such as iron ore and coking coal) tends to be strongest in the earlier stages, while copper tends to be consumed in the later stages.

Specifically, as much as c.61% of Chinese and c.25% of global copper consumption is related to Chinese housing and property activity. Of the c.61% of Chinese consumption that may be related to property, up to c.45-50% is directly associated with project completion (plumbing, wiring for lighting, local power infrastructure, telecom, etc.), and c.12% is associated with the actual property sale, when the property is fitted with copper-intensive consumer appliances and/or tiling intensive in mineral sands. The strong link between completions and copper demand owes to the fact that internal and external copper wiring (for connection to the grid) tends to be installed around project completion. There is strong empirical evidence for the relationship between completions strength and copper prices: using completions as the primary indicator of China’s copper demand, together with ex-China demand data, explains the vast bulk of variation in copper prices over the past decade.

Bad news for copper

In 2012/2013, the Chinese construction sector transitioned from an early-cycle construction phase to a late-cycle one, as completions surged following a wave of new stimulus-related construction post the Global Financial Crisis. Since then, the cycles have been relatively muted, with both new starts and completions growing sub-trend, for the most part. More specifically, the observed weak growth in new starts over the past two years has bearish medium-term implications for late-cycle copper-intensive construction completions. In our view, this weakness has not been priced in, as it has not flowed through to the physical market via higher inventories, and therefore supports our bearish copper view over the next year ($6,600/t and $6,200/t at 6- and 12-month horizons).

Double whammy (at the margin): commodity financing deals

In the past three years, China has increasingly employed complex commodity financing deals to import relatively low-cost US dollar funding, which in some cases has likely been used to fund property development. While the profitability of these financing deals has already fallen owing to lower Chinese interest rates, higher rates outside of China, and – in the case of copper – persistent LME backwardation, we expect a further gradual unwind in such deals over the course of 2015 as China opens up its capital account gradually over time. This broader reduction in financing deals, combined with an expected rise in US interest rates, could result in higher costs of funding for Chinese property developers, potentially further slowing property starts and property-related commodity consumption. At the same time, a further reduction in deals would reduce demand for copper imports into bonded warehouses in China (a key component of the financing transactions), potentially raising inventory visibility outside of China. This scenario would be a double whammy for copper, which is both highly exposed to the property sector and supported by low visible exchange stocks.

Natixis sees Copper to decline to $6,335 a ton in 2015

Since 2010, the mining industry has struggled to satisfy global demand for copper . In 2014 Natixis finally expected to see a surplus, only for China’s SRB to take advantage of the sharp fall in copper prices during March to add to its strategic reserves, leaving the market once again facing a deficit. 

This does not change the underlying fundamentals of the market, viz that copper is currently moving from deficit to surplus, but it has left the market with a dwindling supply of available copper stocks, keeping the forward price curve in backwardation for the time being.

With rising mine output and elevated TC/RCs, Natixis is increasingly optimistic that a copper surplus will soon become visible. This is expected to lead to further weakness in copper prices over the period 2015-16.

Natixis is therefore projecting a decline in copper prices to somewhere around $6,335 a ton in 2015. This would be followed by a gradual recovery in copper prices during 2016, averaging $6,500 a ton, as market expectations focus increasingly upon prospective deficits in the period out to 2020 rather than the surplus in the market during 2015-16.

Global copper market in deficit in 2014 for 5th year in row -ICSG

The global copper market will be in deficit for a fifth straight year in 2014 before switching to a surplus of about 390,000 tonnes next year, an industry group said on Tuesday.

The International Copper Study Group forecast a deficit of 270,000 tonnes this year as operational failures combined with delays in the start-up of new mines will lead to lower-than-anticipated production growth.

The latest estimate is a reversal of the ICSG's previous forecast in April that production would outpace demand by about 400,000 tonnes as demand would lag output growth.

At that time, it predicted a surplus as big as 595,000 tonnes due to increases in output mainly in Asia and Africa.

Click here for the ICSG statement: ((http://bit.ly/1w6vepo))

South Africa plans on declaring copper as a precious metal

 Andries Nel, the deputy minister was concluded in an intense debate in Johannesburg, stating that, the department was anticipating to mark copper as a precious metal, which has been agreed and advocated by many institutions including the state owned, TRANSNET, logistics giant.

At the convention of Association of Municipal Electricity Utilities, the representatives stated that, the government should hurry up and introduce new security measures in order to hold up the increasing number of copper theft, and also trace the whole link of copper cable syndicates.

At the end of last month, a copper theft at Gauteng’s metro lead to THE water crisis, which lasted for at least three weeks. Moreover, that the theft leads to the delay of Gautrain operations which took place last week, between Hatffeild and Pretoria

As the legislation lacks tight laws on the copper theft, it was seldom the copper thefts who were caught, convicted under the law successfully, stated the department