WASHINGTON They might be
bluffing, but copper market participants appear to be unfazed
by the wall slide at Kennecott Utah Coppers Bingham
The anticipated loss of 100,000
tonnes of refined copper certainly doesnt seem to be
making much of a difference to the ability of consumers,
traders and merchants to secure metal.
Delivered copper premiums have
not blown out following the April 10 wall slide and April 15
declaration of force majeure at the mine (
amm.com, April 16).
Traders and merchants at the
American Copper Council meeting in Washington said getting
copper from Utah would probably cost 8 cents per pound instead
of 6 cents prior to the wall slide, but acknowledged that
nobody has paid this as they can get metal elsewhere.
Therein lies the copper
bulls biggest stumbling block: rising inventories,
slowing imports by its largest consumer, China, and a move into
surplus have all dulled the luster of the metal, which has seen
prices slide accordingly.
A year ago, the potential loss
of 100,000 tonnes of refined copper from the market would have
been a huge deal. That amount is only a conservative figure;
the mine produced 163,000 tonnes last year and had been
expected to produce more than 200,000 tonnes this year, and
Kennecott parent Rio Tinto Plc cannot be sure how long it will
be impacted by the wall slide.
Copper industry participants are
banking on the wall slide taking Bingham Canyon out of being
fully operational for at least six months, and potentially
Thats a lot of copper. Or
is it, in a market with London Metal Exchange inventories at
10-year highs, Shanghai stocks over 200,000 tonnes and China
working through a still rather large pile of off-warrant
material, much of which is in bonded warehouses?
Incentives to attract copper
into its three biggest LME storage locationsNew Orleans;
Antwerp, Belgium; and Johor, Malaysiaare still around
$100 per tonne, warehousing firms and traders say.
Of course, this depends on the
customer and the tonnage being brought in; higher volumes
naturally attract a better incentive, and some clients get a
better deal due to relationships.
The steady flow of metal into
warehouses, easily replacing anything headed for the exit,
means copper is available at the right price.
Add to this new copper capacity,
such as the gigantic Oyu Tolgoi Mine in Mongoliaalso
operated by Rio Tintoplus falling Chinese consumption,
and the situation doesnt look quite so dire after
The overall view among industry
participants is that the Bingham Canyon situation hasnt
significantly tightened the marketfor now; thats
the key phrase.
Kennecott says it can meet
customer contracts for April and May, albeit at lower numbers
next month. It also plans to start transporting ore to its
concentrator in the next few days, although at significantly
This is probably why
theres been a muted reaction, which surprised many
attendees at the Washington meeting.
Nobody has yet been backed into
a corner and forced to buy at an inflated premium, and nobody
has been really playing hardball and talking the market up.
What about June onwards, when
Kennecott customers may need to look elsewhere? Perhaps things
will change then.
Much depends on China, whose
buying patterns have changed and left traditional copper bulls
seeking a new patron of late. Increased demand from the Asian
consumer could make a real difference and isnt beyond the
realms of imagination, given the currently weaker copper
If there has been any impact,
its on scrap. The market has tightened considerably in
recent months, industry participants say, pushing discounts for
grades like bare bright from 11 cents per pound under Comex to
almost flat with Comex (
amm.com, April. 18), and a copper scrap premium
could be on the cards soon.