Codelco, Antofagasta halt operations after Chile earthquake

The quake is the latest natural catastrophe to roil mining in copper-rich Chile, which accounts for a third of global red metal output. (Image courtesy of USGS)

Mining operations were suspended at two major copper mines in Chile after a magnitude 8.3 earthquake struck off the coast of the country on Wednesday, killing at least five people and slamming powerful waves into coastal towns.

The closure of the mines, operated by Codelco and Antofagasta (LON:ANTO), pushed copper prices on the London Metal Exchange to two-month highs in early Asian trading as worries about supply disruptions offset lingering concerns about demand from China amid copper's longest rout in years.

Operations were cancelled for safety reasons as several aftershocks, including one at magnitude-7 and four above 6, continue to shake the region after the initial earthquake.

The companies said no damages have been registered at the mines, but operations were cancelled for safety reasons as several aftershocks, including one at magnitude-7 and four above 6, continue to shake the region after the initial earthquake.

By mid-morning Eastern Time, prices had come back down to around $5,340 as most miners with operations in Chile updated their status saying that workers were safe and mines were undamaged.

Codelco suspended open-pit operations at its Andina mine and evacuated workers at its smaller Las Ventanas refining and smelting division, as well as at the two northern ports of Mejillones and Barquito, as a precautionary measure. By Thursday morning, the state-owned company said (in Spanish) that Ventanas was operating as usual, while Andina remains halted until inspections have conclude, which is expected to happen later today.

London-listed Antofagasta said its flagship Los Pelambres mine, which produced over 400,000 tonnes of copper last year, will remain closed until further notice, though there were no reports of damage to personnel or equipment.

Chile, the world's top copper producer, is one of the most earthquake-prone nations in the world. It was hit by an 8.8-magnitude quake in 2010 and in 1960 recorded the largest ever on Earth, according to the U.S. Geological Survey.

Earlier this year unusual heavy rains caused flooding and forced producers to shut many minesin Chile's copper-rich north.

What China Consumes -Graphic

Copper price rallies 6%

In New York trade on Friday copper for delivery in December soared nearly 6% at the open, jumping to a seven-week high following the announcement of steep production cuts by Glencore and a surge in Chinese concentrate imports.

Copper changed hands for $2.448 per pound or around $5,390 a tonne, up 5.9% from yesterday's close of $2.312.

The red metal has recovered strongly from six-year lows struck late August, but remains down 14% year to date after a 16% fall in 2014. The metal peaked in February 2011 at $4.58 a pound or more than $10,000 a tonne.

Glencore (LON:GLEN), the world's number four producer of the metal, on Monday announced plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market.

"It just goes to show how far we have gone down for the industry to withstand further falls in the commodity prices"

Some 40% of the Swiss commodities trader's earnings come from copper. Glencore's move comes on the heels of cutbacks from US-based Freeport-McMoRan (NYSE:FCX) which vies with Chile's state-owned Codelco as the world number one copper miner in terms of output.

Copper was also boosted after trade data from top consumer China showed  a huge improvement in country's imports of copper concentrate.

While imports of refined and semi-finished copper products were flat in August imports of concentrate surged nearly 20% from a year ago and 18.6% from the previous month. Year to date concentrate imports are up 12% to 8.12 million tonnes, while refined copper imports are down 8%.

Senior metals and mining research analyst at Sanford Bernstein, Paul Gait told CNBC following Glencore's announcement that "it just goes to show how far we have gone down for the industry to withstand further falls in the commodity prices":

"This is close to the bottom of the cycle for commodities; it certainly feels like that from my perspective, signs today are indicative of that," Gait said."

I think the pop today is really in relation to China and expectations of continued stimulus

Others were not so encouraging with Philip Petursson, managing director for capital markets and strategy at Manulife Asset Management telling Reuters that "at this point I would say you'd still want to be cautious on the miners as well as the energy sector:"

"I think the pop today is really in relation to China and expectations of continued stimulus. How much that helps to prop up the metals is subject to pretty wide debate. We're still in a supply glut situation."

The advance in the copper price led to widespread share price gains among copper mining majors with Glencore jumping for a second day for a 12% rally since Monday's open in London.

Freeport investors returning from a long weekend in North America chased the counter 6.4% higher in afternoon dealings with more than 31 million shares in the owner of the iconic Grasberg mine exchanging hands.

BHP Billiton (NYSE:BHP) also recovered with shares in the world's number one miner adding 4.7% in New York. The Melbourne-based company which relies on copper for around a fifth of its earnings is now worth $93 billion.

The world's second largest miner based on revenue Rio Tinto (NYSE:RIO) which is less dependent on copper than Glencore or BHP gained 5.1% in New York recovering from steep falls on Friday. The Anglo-Australian giant is worth $65 billion in New York.

The world's fifth largest miner Anglo American (LON:AAL) was the best performer on the day, surging nearly 7.6% in New York. Canada's Teck Resources (TSX:TCK) also made huge strides with shares in the coal and base metal company adding 8.3%.

Southern Copper Corp (NYSE:SCCO) increased 5.5% in value while investors in fellow South American copper producer Antofagasta's (LON:ANTO) celebrated a 9.9% surge in New York.

Glencore fights back — to slash debt by $10bn, halt copper mines in Africa

Mining and commodities giant Glencore (LON:GLEN), which in recent weeks become the poster child of how hard companies have been hit by a brutal sell-off in raw materials, is fighting back.

The Swiss-based company unveiled Monday a $10 billion package of debt-reduction measures, which include issuing up to $2.5bn of new shares, cutting dividends, selling assets and looking to offload a stake in its agricultural business to a third party.

Glencore also said it plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market

Glencore also said it plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market and potentially provide a boost to metals prices.

Investors reacted positively to the news, sending the company’s shares up about 12% before paring gains a touch to trade 6.5% higher at about 131 pence at 12:40 pm GMT.

At the same time, the announcement of a upcoming stoppage at Glencore’ Mopani operation in Zambia and the Katanga facility in the DRC had an immediate effect on copper prices, with the red metal climbing more than 1% to $5,192 a tonne on the London Metal Exchange.

Shanghai Futures Exchange copper rose 0.8% to 39,370 yuan ($6,183) a tonne.

Glencore CEO Ivan Glasenberg said in a statement that the measures announced today wouldn’t affect the firm’s core business activities and overall franchise value.

However, he acknowledged that “recent stakeholder engagement in response to market speculation around the sustainability of our leverage highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty.”

BoAML upgrade

Bank of America Merrill Lynch upgraded the company's rating to neutral following the plan's unveiling.

"Unlike other management teams in the sector, Glencore has acknowledged its debt problem and is taking steps to address it," BoAML said in an e-mailed note.

"We think the plan goes some way to addressing some of our concerns on Glencore's financing, we do still have a question mark on Chinese demand and hence (only) an upgrade to Neutral. Even after the reductions, the company will still be quite highly geared," the note said.

Glencore swung to a net loss of $676 million in its first half of the year from a profit of $1.7 billion in the same period last year due to write downs in the value of its mines and oil fields, which have been hit by a price slump.

The company is now worth a fraction of what it was when it made its first attempt a year ago at a "merger of equals" with Rio Tinto (LON:RIO), which is valued at $92.6 billion.

Dow futures moved over 4,500 points intra-day.

Carnage: Worst Week For Stocks In 4 Years, VIX Soars Most Ever

• China's worst week since July - closes at 5 month lows
• Global Stocks' worst week since May 2012
• US Stocks' worst week in 4 years
• VIX's biggest weekly rise ever
• Crude's longest losing streak in 29 years
• Gold's best week since January
• 5Y TSY Yield's biggest absolute drop in 2 years

*  *  *

Did you get message Fed?

THE CLEAR MESSAGE FROM THE MARKETS IS - HIKE RATES AND YOU'RE DONE, GIVE US QE4 OR IT'S ALL OVER!!!

So let's start with stocks...

Bloodbathery... This was the worst week for global stocks (MSCI World) since May 2012

And the worst week for US equities since Nov 2011...

Futures show the pain started with China PMI, then dumped as Europe collapsed,  then there was no help from the machines as gamma was so imbalanced...

Of course we saw The BoJ in da house to help squeeze stocks with some USDJPY crushing...but that only worked for the small caps (easiest to squeeze)... and then it all collapsed...

Dow enters correction... this was the 9th largest point drop in the history of The Dow...

And The VIX ETF saw its biggest 2-day rise since 2011 (no wonder with 61.7mm shares short against just 60.6mm outstanding)

and before we leave stock-land, her is perhaps the 'spookiest' chart... a Fibonnaci 61.8% extension of the 2007 high to 2009 lows 'nails the top' for now... (h/t @allstarcharts )

FX was a disaster...

Chinese production restrictions may seriously impact Zinc consumption

The production restrictions for environmental protection inspections ahead of the 70th anniversary of the victory of the War against Japanese Aggression will significantly impact zinc consumption, SMM says.

Beijing, Tianjin, Hebei, Shandong, Shanxi, Henan and Inner Mongolia will execute restrictions on production to secure air quality for the big parade due to the 70th anniversary of the victory of the War against Japanese Aggression, SMM learned.

The production restrictions across the tire sector in Shandong will take a toll on zinc oxide demand. Most of tire producers in Shandong’s Dongying will be forced to cut output. Shandong has over 300 tire producers which produce 60% of the total tire output in China. Over 170 low-end tire producers are located in Dongying.

Most galvanized plate producers in Hebei’s Bazhou will also be forced to cut output, including large galvanized tube producer Hengshui Jinghua and Handan Youfa. Hebei and Tianjin have an agglomeration of galvanizers, which consume nearly 30% of China’s zinc output.

Operating rates at galvanizers and zinc oxide producers will thus slide further in August, SMM foresees, dampening zinc consumption.