Mining Profits...Investing In Industrial Metals

Copper futures for March delivery gained 2.35 cents, or 0.8 percent, to $3.0295 a pound on the Comex division of the New York Mercantile Exchange today. Prices have dropped 25 percent from a record $4.04 a pound in May on speculation demand will ease.

On the London Metal Exchange, copper for delivery in three months gained $45, or 0.7 percent, to $6,680 a metric ton at 6:27 p.m. local time.

Copper prices in New York rose after workers walked off the job at a smelter in Chile owned by Xstrata Plc., the world's fourth-largest producer of the metal.

The strike at the Altonorte smelter, Chile's third-largest, occurred after negotiators failed to reach an accord on wages, union president Isidro Cabrera said today. Prices have gained 48 percent this year as labor disputes and mine accidents disrupted production in countries from South America to southeast Asia.

The strike is ``giving a small boost to prices,'' said Marc Kaplan, president of Mews Metals Trading LLC in Verona, New Jersey. ``It would really have to go on for two or three months to make any sort of impact'' on output, he said.


The Altonorte smelter in 2005 produced 297,567 metric tons of almost pure copper from copper concentrates, which is semi- processed copper, according to the Web site of its then owner, Falconbridge Ltd. Zug, Switzerland-based Xstrata purchased Falconbridge this year. The production accounts for almost 2 percent of world supply.

``The importance of this strike shouldn't be overstated,'' said Stephen Briggs, a London-based analyst at Societe Generale. ``The concentrate here can be diverted to other smelters. The bottleneck in copper is at the mine level, not the smelter level.''

Codelco

A strike at Codelco, the world's largest copper producer, would have a bigger impact on prices, Briggs said.

``We have to hear about how the Codelco negotiations are going and that could spur another sharp upside move if there are signs of trouble there,'' said Edward Meir, an analyst at Man Financial Inc. in Stamford, Connecticut, wrote in a report.

``Copper, therefore, looks like it could stabilize at current levels until the various strike and labor issues are resolved,'' he said.

Workers at the Codelco's Chuquicamata mine are seeking wage increases after soaring metal prices increased mining-company profits. The latest offer from Codelco, which is owned by the Chilean government, was ``too low,'' Jeremias Olivares, a union leader, said on Dec. 14. Chuquicamata is Codelco's biggest mine.

Hedge Funds

Hedge-fund managers and other large speculators increased their net-short position in New York copper futures in the week ended Dec. 12, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets that prices will fall, outnumbered long positions by 17,526 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report. Net- short positions rose by 444 contracts, or 3 percent, from a week earlier.

Copper futures fell last week, dropping 3.1 percent to 301.65 cents per pound on Friday. Miners, producers and other commercial users were net-long 20,983 contracts, down 235 contracts, or 1 percent, from the previous week.

Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors, as well as commercial companies that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators' positions because such transactions can reflect an expectation of a change in prices.