Copper Price Raises as Chile Earthquake Cuts Power and Halts Work in Mines
Copper rose the most in 11 months after a magnitude 8.8 earthquake halted mines in Chile, cutting supplies from the world’s largest producer.
The May-delivery contract gained as much as 20.3 cents, or 6.2 percent to $3.4870 a pound before trading at $3.4720 at 10:05 a.m. Sydney time in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. That was the largest intraday gain for the most-active futures since April.
Santiago-based Codelco, the world’s biggest copper producer, is restarting operations at its El Teniente mine after output was halted by the quake, which also closed its Andina mine. The two projects produce about 600,000 tons of copper. London-based Anglo American Plc said Feb. 28 power had been “partially restored” to its Los Bronces and El Soldado mines in Chile, which produce a combined 280,000 tons a year. The two mines stopped output on Feb. 27.
“We could see prices surge for the next four to six weeks,” Pete Sorrentino, who helps oversee $13.8 billion at Huntington Asset Advisors in Cincinnati. “This is the kind of thing that feeds on itself. Until we know the full extent of the damage to the mines and the power grid, people will be concerned.”
The three-month copper contract that closed at $7,195 a metric ton on the London Metal Exchange last week may climb to $7,800 to $8,000, a gain of 8 percent to 11 percent, according to David Threlkeld, president of Arizona-based trader Resolved Inc. Edward Meir, an analyst at MF Global Ltd., forecast prices may gain $200 to $500 a ton. Copper last rose more than 11 percent on Oct. 29, 2008, as China, the biggest consumer, cut interest rates to spur growth.
Power Outages
The four mines account for 16 percent of the country’s output. Chile makes up 36 percent of global exports of copper ores and concentrate, according to the International Copper Study Group. “It is a meaningful tonnage,” said Fred Demler, head of global metals trading at MF Global, a trading company on the LME floor. “Teniente and Andina are bigger mines, Bronces and Soldado are medium-size mines.”
The mines were closed because of power outages, the two companies said. A rockfall also caused damage to a slurry duct at the Andina mine, Codelco said.
Codelco said the quake didn’t cause any significant damage to installations at El Teniente and it may open its Andina mine “in the coming hours.” Power to the two Anglo American mines was “partially restored,” spokesman Pranill Ramchander said in e-mailed comments that didn’t give further details.
Ports Closed
Chile’s earthquake also severed the country’s main highway and destroyed bridges and apartment buildings. The central Chilean ports of San Antonio and Valparaiso remain closed after the earthquake, TVN reported, without saying where it got the information.
Expanding copper inventories provide a cushion for supply disruptions, said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. “The exchange stocks worldwide are still very high and the market was in oversupply before the earthquake,” he said. Prices may still rise $200 a ton as traders switch focus from demand to “supply risks,” he said.
Electronic trading on the LMEselect platform starts at 1 a.m. London time, two hours after the start of trading on the Comex division of the New York Mercantile Exchange. The quake was centered 200 miles (317 kilometers) southwest of Santiago near the main winemaking region and close to Concepcion, a metropolitan region of more 500,000 people. More than 700 people were killed.
