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.