Commodities Buzz: Copper Slips from Four and Half Year High

The price of copper slipped from four-and-a-half-year high as profit booking chipped in. LME Copper was hovering around $ 7223 per tonne, while Domestic copper was trading at Rs 485 per kg, down 0.4%. Earlier in the week the prices of Copper was boosted by a weaker US dollar, the closure of a big Indian smelter and fears that the huge Escondida mine in Chile could be crippled by industrial action. Since the main union at Escondida delivered a pay request on Friday to its majority owner and operator BHP Billiton, the metal used in everything from household wiring to wind turbines has jumped more than 7 per cent.

Copper for delivery in three months on the London Metal Exchange rose as much as 1.5 per cent to $ 7,348 on Thursday, helped by a weaker US dollar, which makes commodities cheaper for holders of other currencies. Talks between BHP and Union No 1, which represents 2,500 workers at the biggest copper mine in the world, collapsed last year leading to a six-week strike, the longest in Chiles modern mining history. The union ended the dispute by invoking a legal provision that extended the current contract until July 2018. The proposal made last week suggested Union No 1 would seek to drive a hard bargain in the latest round of negotiations. It is asking for a signing-on bonus of between $ 35,000 and $ 41,500 for its members as well as a 5 per cent salary increase. This is significantly above other pay deals recently agreed at Chilean mines.

BHP will deliver its counter-offer this month and while union representatives believe the Anglo-Australian miner would not be able to stomach another stoppage n++ it lost $ 1bn in revenue during last years strike n++ analysts are not so sure. n++While BHP will have no desire to have a repeat of last years 44-day strike, it has also indicated previously that it seeks to protect the long-term value of the asset,n++ said Investec analyst Hunter Hillcoat. n++Submitting to aggressive wage demand now, which will only escalate in future years, has the potential to damage the long-term value of the mine,n++ he added. BHP and its partner Rio Tinto have invested billions of dollars in Escondida over the past five years to maintain annual output at more than 1m tonnes. To secure a return on that investment, it must raise productivity and cut costs.

During last years outage at Escondida, the copper price actually declined and did not start to rise until June as data showed the global economy was running at its fastest pace since the global financial crisis. However, analysts said the market would be more sensitive this time round, pointing to a tightening market in Asia following the closure this year of Vedantas 400,000 tonne-per-year copper smelter in the south Indian town of Tuticorin.