Metals may dip as strikes end

MARKET OUTLOOK

Base metals, led by copper, are likely to ease in the coming week in anticipation that supply would resume from strike-torn miners and smelters, who have resolved the disputes with their workers.

Last week, as many as three leading mining companies successfully negotiated with their workers to end the disputes which, according to analysts, have changed the market sentiment from bullish to bearish. "After all, the metals trade is a sentiment game," they said.

Chile's Collahuasi mine, the producer of 440,000 tonnes of copper "� 380,000 tonnes in concentrates and around 60,000 tonnes in cathodes each year and equivalent to 8 per cent of the country's mining capacity "� ended the strike and workers resumed duty after the company management accepted the wage hike offer.

In Zambia, Konkola Copper Mines (KCM), the largest copper producer in the country, has signed a new labour deal that will give its 10,000 unionised workers a 20 per cent salary increase. The company, majority owned by London-listed Vedanta Resources, has raised its wage offer by 16 per cent with a retrospective effect from July 1, 2007, to June 2008.

In another development, miners at First Quantum Minerals' Kansanshi copper mine in Solwezi ended a two-day strike on Friday morning and returned to work after the intervention of the Zambian president. In its second year of operation, the company is planning to produce about 145,000 tonnes of A grade copper cathode in 2007.

But, operations at Codelco's Andina are still suspended, costing 700 tonnes a day of lost output, after a worker was injured, coupled with a heavy snowfall. In Canada, the strike at Xstrata's Canadian Copper Refinery (CCR) continues and in Peru, the dispute at Southern Copper Corp is still not resolved.

Copper on the London Metal Exchange (LME) jumped $38 to settle at $7,940.5 a tonne last week on uncertainty over the talks between striking workers and miners, which resulted into an inventory decline of 7,925 tonnes to 97,550 tonnes.

In the domestic market, however, traders preferred to abstain from the current volatile market.

"We are waiting for the base metals prices to settle down to utilise our 100 per cent (35-40 per cent currently) capacity," said a brass equipment manufacturer. The final price of products made of brass, an alloy of copper, aluminium and zinc is determined by the price movement of the raw materials.

The outlook for aluminium also looks bearish because of a huge way-in of inventories in the LME-registered warehouses that ended the week at 838,275 tonnes from 824,700 tonnes last week.

The metal slumped towards the weekend to $2,726 a tonne after touching a high of $2,775.5 a tonne in the middle of the week. Aluminium was ruling at $2,743.5 in the beginning of the week.

Meanwhile, China is all set to play a major role in the metal's price movement as demand is expected to surge by 33.6 per cent to 11.7 billion tonnes this year.

The bulls are likely to remain active at the zinc counter on the intermittently falling inventories, which settled the weekend at 68,950 tonnes from 71,450 tonnes earlier. Zinc prices, meanwhile, gained $115 last week to settle at $3,540 a tonne.