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Copper Prices – It’s A Wait and See Week

Copper Prices – It’s A Wait and See Week

By Jim Williams

Copper futures played a small game of see saw to start trading this week as all eyes are looking ahead. That’s because there are a series of key economic events later in the week that promise to shed light on the strength of the U.S. economy.

Wednesday’s preliminary estimate on second quarter U.S. economic growth and Friday’s U.S. jobs report for July are both expected to indicate that the economic recovery is continuing.

Investors are also looking ahead to the Federal Reserve’s monetary policy statement due on Wednesday, along with speculation over when the central bank may raise interest rates.

Meanwhile, in China, data released earlier showed that profit at industrial companies in the Asian nation increased by 17.9% in June from a year earlier, after gaining 8.9% in May. Those numbers fuel optimism over the health of the world’s second largest economy and the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Mining Is A Go in the US

A Wall Street Journal article published last week stated Freeport-McMoRan Inc. isn’t waiting around for economic numbers to go ahead with copper mining right here in the United States.

Phoenix-based Freeport ramped up copper production in Arizona and New Mexico by 13% in the second quarter, despite sluggish prices, as it pursued its strategy of expanding in the U.S.  

The article goes on to say the U.S. has become one of the friendliest places in the world for mining because of easier labor laws and more reliable environmental and permitting regulations.

The centerpiece of expansion efforts in the U.S. is Morenci, Arizona, a 65,000-acre complex on the New Mexico border. Freeport expects full production by the end of 2014, with the goal of producing a billion pounds of copper a year by 2015 – that’s up from 564 million pounds last year.

Freeport’s Chief Executive Richard Adkerson was quoted in the article as saying, “We have a flexible workforce that is much more flexible [in the U.S.]. You can employ people without having the kinds of restrictive labor laws you have in other places.”

Freeport is one of the world’s top copper producers with mines in the U.S., Chile, Peru, the Democratic Republic of Congo and Indonesia. 

The news of Freeport expanding its mining efforts in the U.S. comes on the heels of the company announcing it has received approval from Indonesia to resume exports from its Grasberg mine.

Freeport will resume copper concentrate exports from Indonesia in August. They had reduced operations by about half at the Grasberg mine, the third largest in the world, after the government-implemented restrictions in January to encourage local raw-material processing.

Freeport is expected to export 756,000 tons of copper concentrate in the second half of this year. Reuters reports this will probably tip the market into surplus. “We saw last week the copper prices catching up, but the Indonesia story has thrown cold water on a bullish recovery as we move into supply surplus,” said William Adams, head of research at Fast Markets.

We will keep you updated on what this means to the price of copper.

Copper By The Numbers

Copper futures for September were up 0.19% to trade at $3.2465 per pound. Daily low and high were at $3.2260 and $3.2520 per pound, respectively. Copper contracts added about 1.7% last week, supported by robust Chinese factory figures and steady US housing.

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