Tuesday, March 02, 2010

Chile earthquake affects copper prices

he weekend brought massive destruction to much of Chile after an 8.8 magnitude earthquake struck near to the coast of the country [35.846S,  72.718W]. The official death toll stands at a little over 700 despite the enormity of the earthquake and the widespread damage which spread for hundreds of kilometres. Looting has been reported in many places across the country and residents have taken to sleeping in tents, fearful that the aftershocks could bring further damage [BBC].

The coverage of the disaster has been far less significant than that seen following the Haiti earthquake that saw around 100,000 killed. Few front pages of European newspapers led with the story on either Sunday or Monday. There is also little of the saturation coverage seen and heard on radio and television following the Haiti disaster. But while the humanitarian situation is far worse in Haiti, the global implications of the Chile quake may be more greatly felt.

The price of copper has soared to its highest level in five weeks following the devastating earthquake that struck Chile on Saturday morning. Prices on futures of the metal traded on the London Metal Exchange (LME) touched $7,600 a tonne, the highest since 20th January. This was despite assurances by officials in Chile that the country would be able to honor its export commitments,

Chile is the world's biggest copper miner, and production at four major mines was suspended affecting about 20% of the country's capacity. While production at some of the largest mines resumed on Sunday, Chile's mining minister said it could take two days for full production to resume.

Over 5,000 lots of copper traded on the LME, more than double the typical volume, during Asian trading hours. Bonnie Liu, analyst at Macquarie bank in Shanghai, predicted that copper prices could rise to $8,000. "This is going to create some short-term panic in the industry which means the price could remain at a very high level," Liu said. Shares in copper producers in Japan and Shanghai surged on the increase in prices. Oil prices were also affected by the earthquake. Crude oil rose as high as $80.62 a barrel at the beginning of trade Monday [BBC].

tvnewswatch, Beijing, China

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