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Kennecott Utah Copper declares force majeure

Keywords: Tags  Kennecott Utah Copper, force majeure, copper cathode, Bingham Canyon, Rio Tinto, Barbara O'Donovan, Suzy Waite

NEW YORK — Kennecott Utah Copper has declared force majeure after a wall slide forced the company to suspend mining at its Bingham Canyon operation.

The division of Rio Tinto Plc expects April shipments of copper cathode to continue as planned, but May shipments from inventory at its refinery will be at a reduced level. "Thereafter, we do not anticipate the ability to make further shipments for the foreseeable future," the company said in an April 15 letter to customers.

"We will continue our force majeure status until we are able to perform our obligations," the company added.

Kennecott, which continues to produce copper cathode at its refinery using stockpiled inventory (, April 12), said it will provide information on May shipments and other shipments as soon as possible.

Separately, London-based Rio Tinto has cut its 2013 copper production forecast in the wake of the April 10 wall slide. Rio Tinto now expects to produce about 540,000 tonnes of mined copper this year, down from February’s forecast of 665,000 tonnes, and 205,000 tonnes of refined copper, down from the 305,000 tonnes it forecast in February (, April 16).

The Bingham Canyon woes will undoubtedly cause a spike in copper premiums, traders and consumers agreed (, April 15). Higher numbers are already being quoted, although few transactions have taken place yet.

“I think premiums will skyrocket,” one trader told AMM.

AMM’s spot copper cathode premiums are between 4.5 and 5.5 cents per pound, but market participants speculate they will move up by at least a couple of cents.

Consumers and traders could meet their copper needs with imports, most of which enter the United States via New Orleans. That isn’t a solution for everyone, however, as freight costs from New Orleans to the Midwest are very expensive, the trader said.

“This is taking 15,000 tonnes a month out of domestic circulation,” the trader said. “Forget the warehouses; you’ll never get any out of there. And the stuff coming through New Orleans is expensive. This is not a good thing.”

The Kennecott outage “is not a huge deal in the (global) market, but it’s a big deal in the United States,” the trader added.

The outage hasn’t yet affected copper prices, with three-month copper on the London Metal Exchange closing the official session April 16 at $7,250.50 per tonne, down 3.5 percent from $7,516 a week earlier and 12.5 percent below this year’s high of $8,286 per tonne in early February.

Weak copper demand from Europe and China has kept LME prices low, sources said.

“We haven’t seen an impact yet in terms of prices. It shows you how market fundamentals aren’t good,” a second trader said.

"For a little while, the price doesn’t always reflect the local conditions," the first trader added.

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