Market forces send copper prices tumbling

The base metal, which during December closed within whiskers of $1.65(US) per lb (a spot price record) on Comex and set a 3- month record high on the LME, is currently trading in New York in the $1.30-$1.35 range.

“We had a tremendous run-up in the fourth quarter of 1988 — 30-40 cents a lb — and in January the prices remained fairly rich,” Thomas Komlos, base metals analyst with investment firm ScotiaMcLeod of Toronto, said. “So, after such a surge, it would not be surprising to see copper pulling back.”

Komlos said a further drop in the metal’s price of 20-25 cents would not surprise him, although he would be concerned if the price fell below $1. (Copper averaged $1.18 in 1988 on the LME.)

Agreeing with Komlos about the copper price having run out of steam is mining analyst Terry Ortslan of securities firm Deacon Morgan McEwen Easson of Montreal. Ortslan, who recently visited Chile, suggests the price may rally again in April or May because of contract talks between U.S. copper miners and management. End may be in sight

Metals prices in general, with the exception of aluminum, continue to do well, Komlos said. While he expects metals prices to hold up at least until mid-year, Komlos said the key issue is whether the economy is heading for a recession.

Word out of Peru, a country blessed with a variety of precious and base metals but where labor and management have not been getting along of late, is that further trouble in the form of a strike, at least at one mining operation, has been headed off. Metals workers at other operations in the country continue to negotiate.

In Chile, damage is being assessed following an explosion at a new flash furnace at the Chuquicamata mining division of state- owned Codelco. The division is expected to suffer a production loss of a minimum 8,000 tonnes copper.

Ortslan said Codelco seems to be stretching itself to the limit to produce more copper and accidents may almost be unavoidable.

Chile may lose its ranking as the top copper-producing nation in 1989 to the United States, which has been playing catch-up by re- opening old mines, Ortslan said. The South American nation should regain its number one position by 1992, he said, mentioning a smelter expansion program under way by state-owned ENAMI and plans by Disputada to double production.

Workers at the Cobre de Mexico copper refinery in Mexico have settled a 6-day wage strike, the agreement calling for a 16% salary hike, Metals Week reports.

The increase in warehouse stocks is attributed by the research department of Barclays de Zoete Wedd to the de-stocking by some companies at year-end, the slowness of some mills in starting up again after the year-end holidays, a nd to the well covered positions of more than a few consumers because of forward purchases in November and December.

“In the longer term, the availability of metal will be limited by the output capacity of the smelters, even though the concentrate supply is increasing,” writes the investment firm.

The U.S. Bureau of Mines in Washington, D.C., withholds output data but does report there was domestic mine production of graphite in 1988. It discloses an estimated 58,000 tons was imported for consumption, up from 48,000 tons the previous year, and that 20,000 tons was exported, up from 13,000 tons in 1987.

The government agenc from 48,000 tons the previous year, and that 20,000 tons was exported, up from 13,000 tons in 1987.

The government agency says natural graphite was consumed by several hundred manufacturing firms mainly in the northeastern and Great Lakes areas of the United States. Principal uses of the mineral were estimated to be refractories, 26%; dressings and moulds in foundry operations, 15%; lubricants, 14%; brake linings, 13%; pencils, 7%; steelmaking, 5%; and other, 20%.

The various average prices paid by U.S. customers (at foreign ports) in 1988 are reported to be $675 per ton for flake graphite, $758 per ton for the lump and chip variety from Sri Lanka, and $44 per ton for amorphous graphite from Mexico.

The bureau reports the availability of graphite was satisfactory during 1988. Demand was met largely by imports of flake from Brazil, China and Madagascar; lump and chip from Sri Lanka; and amorphous from China and Mexico.

World mine production of graphite in 1988 is estimated by the bureau to be 703,000 tons, up slightly from 694,000 tons the previous year. South Korea was the top non-communist producer nation at 90,000 tons, followed by Austria and Mexico at 40,000 tons and India at 25,000 tons. Total output last year from countries with “centrally planned economies” amounted to 400,000 tons.

In Canada, there are a number of graphite projects in different stages of development. Set to begin production this month from its St-Aime-du-Lac-des-Isles, Que., deposit is Stratmin Inc. Less advanced is the Fermont, Que., exploration project of Mazarin Inc. In Ontario, Cal Graphite says it is near production at its project north of Huntsville, while Stewart Lake Resources is actively pursuing its exploration project in the Kingston area.

Natural graphite has application in several areas, including in iron and steel production, foundry facing operations and as a dry lubricant.

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