Copper prices rally on Codelco production halt

Vancouver The worlds leading copper producer, Codelco, said a fire has halted output at its Radomiro Tomic mine in northern Chile, news that sparked a sharp rise in the price of copper futures.

News of the production halt pushed the active May contract up US7.40 to US$2.78 per pound on the Comex division of the New York Mercantile Exchange, March 7.

The Radomiro Tomic mine accounts for 17% of Codelcos annual production and has been halted due to an electrical fire on March 2.

Codelco, a state-owned company which holds 20% of the worlds copper resources said no one was injured and expects the mine to return to full production gradually over the next 15 days as equipment is repaired.

Diego Figueroa, an analyst at brokerage Larrain Vial SA in Santiago told Bloomberg news service that Codelcos disruption in supplies will bolster copper prices, adding that the market is still tight.

Miners such as Codelco and BHP Billiton (BHP-N) benefited as a surge in demand from China fueled a 41% jump in the price of copper last year.

It was an increase that helped Codelco boost its profits in fourth quarter of 2006, even as output slid 3.3 percent in the quarter from a year earlier.

Codelco which produced 1.8 tonnes of copper in 2006 expects to make up the lost production at Radomiro Tomic. The mine produces about 300,000 tonnes-per-year of the metal, according to estimates from the Chilean Copper Commission, a state-run research group.

Last week, Codelco Executive President Jose Pablo Arellano said the market is benefiting from firm Chinese demand. So far this year, China is buying more copper than it did in 2006, when it drew on stockpiles to meet its demand, Arellano said.

China’s copper imports in January rose to their highest level since June 2005, the Asian country’s customs office said last week.

However, he expects lower copper prices to cut into 2007 profits at Codelco, which faced an increase in energy and labor costs last year, and is now trying to trim expenses.

“We know that prices in the future will be lower than they are now,” Arellano said.