Copper climbed the most in 11 months in New York and mining shares surged after an 8.8-magnitude earthquake in Chile, the world’s biggest producer, forced Codelco and Anglo American Plc to shut mine operations.
Futures for May delivery in New York soared 6.2 percent, the biggest gain since April, and Jiangxi Copper Co. and Tongling Nonferrous Metals Group Co. gained as much as 10 percent on speculation the quake would disrupt shipments. Copper in London climbed to the highest level in more than five weeks.
The temblor disrupted almost 5 percent of world copper production, according to estimates from Walter de Wet, a London- based analyst at Standard Bank Plc. Chile mined 5.4 million metric tons of the metal last year, or about 34 percent of global output. Prices more than doubled in the past 12 months as the world economy recovered from its worst postwar recession.
“I would think it’s a knee-jerk reaction,” Geoff Clear, head of Asia commodities at Australia & New Zealand Banking Group Ltd., said. “But it’s not an unreasonable one on expectation that it is a seriously big producer. We have to wait for confirmation on how damaged things are.”
Codelco, the world’s largest producer, said it will meet supply contracts. The state-owned company can compensate for any shortfalls from its affected El Teniente and Andina mines with shipments from undamaged plants in Chile’s north, according to a company official briefed on the plans.
Structural Damage
The company ruled out declaring force majeure, a clause in contracts that allows companies to miss obligations because of circumstances beyond their control.
The impact “appears to be limited for now but should not be insignificant in a copper market that continues to see a chronic underperforming supply side,” de Wet said in an e-mail today. There was “sufficient infrastructure damage,” especially to power supply, to disrupt around 17 percent of the country’s copper production, he said.
Codelco began a “gradual” restart of operations at the 381,000 ton-a-year El Teniente underground mine in central Chile after reconnecting the power supply cut by the earthquake. The temblor didn’t cause any significant damage to equipment, the company said. The 219,554 ton-a-year Andina mine remained closed through yesterday after a power failure.
Bronces, Soldado
Andina may reopen later today after the power cut and a five-ton boulder damaged installations, according to the Codelco official. The Ventanas smelter that processes copper concentrates from Andina is closed for programmed maintenance, according to the official.
Anglo American Plc said Feb. 27 its Los Bronces and El Soldado mines in Chile stopped operating after power cuts. The two mines produce about 280,000 tons annually. Power to the installations was “partially restored” yesterday, spokesman Pranill Ramchander said in e-mailed comments, without giving more details on whether the company was planning a restart.
May-delivery copper gained as much as 20.3 cents, or 6.2 percent, to $3.4870 a pound, before trading at $3.39 at 1:52 p.m. Shanghai time, in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. That was the largest intraday gain for the most-active contract since April.
Copper for three-month delivery on the London Metal Exchange jumped as much as 5.6 percent to $7,600 a ton before trading at $7,460, up 3.7 percent. Futures in Shanghai climbed the 5 percent daily limit.
Reduce Surplus
“Our latest demand and supply balance put the copper market in a 125,000-ton surplus in 2010,” said de Wet. Ten days of production losses at the four mines “could wipe out a fifth of the copper surplus for the year,” he said.
The Chilean ports of Valparaiso and San Antonio, through which El Teniente ships its copper, remain closed to new ships, Raul Maturana, secretary general of the National Federation of Port Workers of Chile, said in a telephone interview. Trucks with cargo aren’t leaving the ports either, he said.
There will be a coordination meeting at 10 a.m. local time with port authorities to evaluate when normal activities may resume, he said.
“Exports from Chile look to be largely unaffected,” de Wet said. While port activities at San Antonio are closed, there was no impact on the larger and more important ports of Antofagasta and Mejillones, he said. As mines should have some above-ground stockpiles, “as long as ports are open, the export of copper from Chile may see little disruption,” he said.
China, Japan
China, the world’s biggest copper consumer, bought 1.45 million tons of refined material from Chile last year, almost half of total record imports of 3.19 million tons, customs figures show. The country purchased 1.38 million tons of concentrate and ore from Chile, or 23 percent of the total.
Japan’s concentrate imports from Chile are unlikely to be affected, said an executive at Pan Pacific Copper Co.
“I don’t think there will be any significant impact,” said Hidenori Kamoo, general manager of the market research team at Pan Pacific Copper, the country’s top smelter. “Our imports mostly are from mines in the northern part of the country.”
Japan imported 1.7 million wet metric tons of concentrates from Chile in 2009, 36 percent of total purchases, said Kamoo, citing finance ministry data. A wet ton includes 8 percent water.
Concepcion, the epicenter of the quake which killed more than 700 people, is 200 miles (320 kilometers) southwest of the Chilean capital of Santiago.
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