Archive for April 13th, 2010

COPPER…WHAT’S REALLY DRIVING THE PRICE?

Copper is a reddish brown non-ferrous mineral which has been used for thousands of years by many cultures. The metal is closely related with silver and gold, with many properties being shared among these metals. With world population and development on the increase, demand for copper is expected to continue to build well beyond current annual consumption to:

•conducting electricity and heat

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•communications

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•transporting water and gas

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•roofing, gutters and downspouts

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•protecting plants and crops, and as a feed supplement and

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•Making statues and other forms of art.

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World copper consumption is expected to grow 5.4 per cent this year, led by China which is expected to buy nearly 40 per cent of global output, industry experts told the World Copper Conference on 8th April, 2010.

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Primary copper production starts with the extraction of copper bearing ores. There are three basic ways of copper mining: surface, underground mining and leaching.

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Open-pit mining is the predominant mining method in the world. These are the top ten ranked mining countries.

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IN THE GLOBALEXCHANGES

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Three commodity exchanges provide the facilities to trade copper: The London Metal Exchange (LME), the Commodity Exchange Division of the New York Mercantile  Exchange (COMEX/NYMEX) and the Shanghai Metal Exchange (SHME). In these exchanges, prices are settled by bid and offer, reflecting the market’s perception of supply and demand of a commodity on a particular day. Exchanges also provide for warehousing facilities that enable market participants to make or take physical delivery of copper in accordance with each exchange’s criteria.

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FACTS

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The average LME futures price for March 2010 was US$7,790 per tonne, almost double from the March 2009 average of US$4,040 per tonne. The 2010 high and low copper prices through the end of March were US$7,870 and US$7,265 per tonne, respectively. As of the end of March 2010, copper stocks held at the major metal exchanges LME, totalled 514325 tonnes.

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ICGS PREDICTIONS

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As per ICSG press release on 1st February 2010 & based on existing facilities and announced project developments, annual mine production capacity in the period 2009-2013 is expected to grow at an average rate of around 4.3% per year (%/yr) to reach 23.1 Mt in 2013, an increase of around 3.6 Mt (19%) from that in 2009.

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CURRENT SCENARIO

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Copper hit a 20-month high above $8,000 a tonne on 6th April,2010, after reports showed manufacturing expanded in India, the US and Europe, as well as China, and after US payrolls expanded by the most in three years. Most gains were driven by upbeat employment data out of the U.S., which led markets to view the state of the world’s largest economy in a more positive light. Slow but sure decreases in LME inventories provided added signs of a recovering physical market. Again, pulling back from a 20-month high copper looks uncomfortable at $7850 along with copper futures at MCX tracking overseas markets and a firm rupee.