Copper up as RI strike seen cutting supplies
Copper up as RI strike seen cutting supplies
LONDON (Bloomberg): Copper climbed as much as 1 percent
yesterday, to its highest in four days, after Freeport-McMoRan
Copper & Gold Inc. said a labor dispute at its Grasberg mine in
Indonesia could force it to miss deliveries.
All mining at Grasberg, the world's second-biggest copper
mine, has been suspended for four days after 5,000 miners went on
strike, demanding higher wages.
If the strike continues, it will reduce already lean global
supplies of copper concentrate, particularly to Japan, the
world's second-largest copper user after the U.S., analysts said.
"The copper concentrate market is already tight," said James
May, a metals analyst at Metal Bulletin Research Ltd. in London.
"This will exacerbate that tightness, particularly in Japan.
If it appears that the strike is spreading and that it's
sustained, then you could have a spike in prices."
Copper for delivery in three months rose as much as US$16 to
$1,643 a metric ton in electronic trading on the London Metal
Exchange, its highest price since Aug. 10.
Freeport said it declared a "force majeure" this week at the
mine, even though it is continuing to ship concentrate from its
copper stockpiles at Grasberg. Copper concentrate from the mine
is mainly shipped to Japan and to Freeport's operations in Spain,
May said.
Declaring a force majeure removes Freeport's contractual
liabilities if unforeseen events mean it is unable to meet its
contract conditions.
The company has declined to say how many weeks worth of
concentrate -- crushed rock containing copper, gold and silver --
it has in stock, saying only it expects the strike will be over
before stockpiles run out.
Force majeure
In Jakarta, Freeport said it declared a "force majeure" this
week in a warning to customers that a strike at its Grasberg mine
in Indonesia could force it to miss deliveries.
The warning comes even though the company continues to ship
copper concentrate from stockpiles at Grasberg, the largest
copper and gold mine in the world.
Freeport said it had to declare force majeure within 48 hours
after the strike started to protect itself from claims by
customers if deliveries are cut at a later date.
Force majeure remove a company's contractual liabilities if
unforeseen events make it unable to meet contract conditions.
"The way our sales contracts are set up, if we are going to
declare force majeure we have to do it within 48 hours of the
incident," a Freeport spokesman said.
He said the declaration is insurance against the strike
dragging on. "If we got three weeks down the road and ran out of
concentrate we couldn't declare force majeure."
All mining at Grasberg has been suspended for the past four
days after 5,000 employees went on strike, demanding higher
wages.
Freeport has declined to say how many weeks worth of
concentrate -- crushed rock with high levels of copper, gold and
silver -- it has in stock, saying only it expects the strike will
be over before it runs out. Analysts estimate the company has
between two weeks and a month's worth of concentrate on hand.
The Grasberg mine, majority owned by Freeport, is also part
owned by former Indonesian President Soeharto, the Indonesian
government and Rio Tinto Plc The company ships most of its
concentrate to a refinery it owns in Spain, and some to Japan and
other countries.