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In terms of developments ex-China, a key pre-occupation has been the threat of disruption to copper supply from labour action in Chile. Somewhat irregular in this respect was the statement from the Federation of Coppe..

23 Mar 2013

LONDON (Commodity Online): China may sustain its recent economic recovery in the second quarter of 2013, states a recent market analysis by London based Barclays which is good news for base metal prices.

Fabricators and traders predominantly observed demand conditions picking up, matched by an increase in physical buying.

In particular, demand for copper wire, cable, rod and foil has picked, and commensurate with that, semi fabricator utilisation rates have picked up.

There is also some evidence of mild restocking at end users due to recent price weakness. Such improvements in supply chain activity have been reflected well upstream, with improving SHFE-LME price ratios in aluminium, copper and zinc all moving towards arbitrage territory and suggestive of a pick-up in spot market purchases.

Retrospective conditions in that respect have certainly been soft, as the trade data for February demonstrated, for example, with net refined copper imports dropping to the lowest level since May 2011.

However, current trends in supply chain activity suggest that import demand should improve at least modestly into Q2. If current macro concerns rescind, then such signals from China may drive some short covering, which could provide modest upwards support for prices.

In terms of developments ex-China, a key pre-occupation has been the threat of disruption to copper supply from labour action in Chile. Somewhat irregular in this respect was the statement from the Federation of Copper Workers umbrella union group that it would support a 24-hour work stoppage (which could be extended) at all of Codelco’s mines within the next 30 days unless its demands, for greater job security in particular, are met.

Typically labour strikes revolve around specific mine negotiations, with each mine having its own labour contract, whereas this potential action appears more leveraged to broader concerns about the restructuring effect of the company.

While a single-day strike at all of Codelco’s copper mines would result in a copper production loss of only 5Kt per day, which is negligible in the content of current LME stocks of 550Kt, certainly a more prolonged action would have a more fundamental significant effect on the copper market.

Barclays sceptical of the latter scenario developing given that this labour action is likely to be classed as illegal under Chilean law because it would be taking place outside regulated contract negotiations.

Separate to this threat, there is already labour strike action in Chile affecting copper export flows with the strike by port workers at Angamos in Northern Chile.

This is one of several ports Codelco uses to ship copper from the country. It is unclear at this juncture how much copper is shipped through this port although Metal Bulletin has reported that at least one shipment of Codelco copper has so far been delayed.


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