LONDON (Commodity Online): The metals fell sharply on Friday with nickel leading the fall, closing down 5.7% on Friday. Prices have continued to slide this morning with copper trading at close to $6,700/t. CFTC non-commercial data for the week ended 27 September showed that all positions were scaled back as risk reduction has continued with the total net short position shrinking to 1.5K lots.
Daily price swings in the metals have been large as uncertainty and skittishness is translated into prices. The recent drop in prices is beginning to make producers evaluate potential supply-side responses with Norilsk reporting that around 10% of global Nickel production is loosing money, which could result in 30Kt of output being cut in Q4.
At prices of $18,500/t Norilsk reported that some Russian, European and Japanese producers of ferronickel and blast furnace nickel pig iron (NPI) producers in China are loosing money. The company also warned about the potential longer-term impact a period of lower prices could have on future projects. Indeed, during the previous financial crisis a lot of damage was done to the supply side of the base metals markets (Metals Magnifier: Jumping the gun? February 2009).
Meanwhile, Approval for Anglo American’s 225Ktpy Quellaveco Copper mine in Peru has been delayed. The $3bn project was slated to go for board approval this year, but this has been pushed back to 2012 as talks with communities have been ongoing, particularly over water supplies. Although recent actions by the new Humala government have sought to quell mining company fears over new tax legislation, the situation in Peru is “not altogether positive” according to Anglo’s CEO Cynthia Carroll.
In particular, issues with local communities are still rife and have disrupted many mining projects due to disputes over land use and water rights. In fundamental news, Teck Resources has reached a tentative agreement with workers at its 100Ktpy Highland Copper mine in Canada, which if ratified would avoid strike action.
