Copper took over as the commodity under focus late last week after a strike forced BHP Billiton (BHP) to curtail activity at its huge Escondida mine in Chile and declaring force majeure on contracted shipments.
The BHP move that saw copper prices surge to their highest in more than 20 months on Friday night on the London Metal Exchange (LME) in the wake of the force majeure declaration, which was reported by Reuters and other news services.
Three month copper futures on the LME surged 4.6% to close at $US6,090 a tonne, the highest since May 29, 2015. In New York, Comex March copper futures rose 11.5 cents, or 4.3%, to $US2.768 a pound, ending about 5.8% higher than a week ago.
BHP issued an official warning of supply disruptions after workers at the Escondida mine in Chile walked out on Thursday, bringing production to a standstill. Analysts say the strike will have to continue for a month to have a real impact on a still oversupplied copper market.
BHP shares were up more than 2% in London on Friday night while Rio Tinto shares (it is a shareholder in Escondida) surged more than 5%.
The copper strike was not the driver, but a sharp rise in Chinese iron ore futures which topped $US100 a tonne for the first time in more than two and a half years.
The mine’s output for the six months ending December 31 was 452,0000 tonnes, unchanged from a year earlier, according to BHP’s latest operational review. It had forecast Escondida would produce 1.07 million tonnes in the 12 months to the end of June.
A fire broke out in a dormitory at the Escondida mine on Friday, injuring three people working on a plant expansion. BHP said the blaze has been controlled and the cause is being investigated.
The strike comes as exports are also stopped at the world’s second-biggest copper mine at Grasberg in Indonesia as Freeport, the owner and the Indonesian government quarrel.
Rio Tinto (RIO) has an offtake agreement with Freeport at Grasberg, which won’t be triggered if the stoppage continues for much longer. Rio Tinto is also a shareholder in Escondida.
Chinese copper imports were mixed in January (but were also hit by the timing of the Lunar New Year break). Data on Friday showed that imports of copper fell 14% in January from a year ago, while China’s imports of copper were also down 22% from December to 380,000 tonnes in January, the General Administration of Customs reported.
But China’s imports of copper concentrate and ore imports rose were up nearly 7% from a year earlier to 1.25 million tonnes.
Meanwhile Comex gold futures in New York ended lower Friday night, but ended the week with a gain of more than 1% as the US dollar lost more ground against the yen.
April gold fell 90 cents, or less than 0.1%, to settle at $US1,235.90 an ounce after trading as low as $US1,222.60. Prices climbed by 1.2% for the week, according to FactSet data. It was gold’s sixth weekly gain in the last seven weeks (since the start of the year).
Comex March silver futures rose 19.2 cents, or 1.1%, to $US17.933 an ounce on Friday, for a weekly rise of 2.6%. So far in 2017 gold futures are up more than 7%.
