After a mixed day on Monday, which saw Copper and Lead both rise by between 2-3% and Nickel and Tin down by 2%, prices are flat this morning, Said Barclays in a research note. In terms of base metals news, it was reported that close to 4,500 workers at Volcan’s Yauli district plan to go on strike if wage negotiations fail. This would lead to a reduction in the workforce to just contract workers at Volcan's Zinc mines in the Peruvian district, namely Mahr Tunel (40Kt expected output in 2011), Andaychagua (42Kt expected output in 2011) and Carahuacra (73Kt expected output in 2011).
Given that there are 5,000 contract workers it is unclear whether there would be any immediate production impact. Meanwhile, at Freeport McMoRan’s 510Ktpy Grasberg copper mine in Indonesia, workers have extended their strike over pay into a third month until December 15. The strike has resulted in the full closure of the mine, the second largest in the world, resulting in a loss of ~80Kt so far, according to Barclays estimates.
On top of an array of other supply losses due to technical difficulties and declining ore head grades the spot copper concentrate market has tightened up significantly. Also on the supply-side, Reuters reported yesterday that Glencore has delayed the restart of its 80Kty Lead smelter in Portovesme in Italy until likely the end of 2012.
Issues over environmental regulations are reported to have played a part, but the weaker price environment in H2 2011 will not have offered much of an incentive to restart either. The lower price environment for base metals claimed one of its first closures yesterday as Albidon announced that it was stopping operations at its Munali Nickel mine due to 'serious cash flow difficulties'.
Munali has been expected to produce 4Kt of nickel in 2011 followed by 5Kt next year. However, it now appears that this will be lost next year. Finally, remaining on the same subject of cost pressures on the base metals supply-side, Rusal stated yesterday that, in its view, 10-15% of the world primary Aluminium capacity will be shut down if prices remain at current levels in the first half of 2012. The company stated that “at current prices, about a quarter of world production is unprofitable in some regions, including China, Europe, America and some of Canada's capacity, too”.
Rusal was also bullish on prices, forecasting aluminium prices to rise by $300/t in 2012 from current levels although unlikely to see much change over the rest of this year.
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