Copper market cautious over Indonesian ore supply
Saturday, October 19 2002 - 01:54 AM WIB
"The main issue for the copper market in the short term is the recommendation by the UK and Australian government for their nationals to leave Indonesia," GNI research said in its daily report.
"This immediately calls into question the security of the Freeport-McMoRan copper operations in the country," the report added.
U.S. mining giant Freeport-McMoRan Copper and Gold Inc produces around 750,000 tonnes of copper concentrates a year at its Grasberg mine in the Eastern Indonesian province of Papua.
A disruption in the company's mining operations could have an immediate impact, given that the copper market is already suffering from a shortage of concentrates.
In the wake of last week's devastating blast on the holiday island which killed 181 people, security around the world's biggest gold and copper mine has been boosted.
But Freeport-McMoRan said its Indonesian operations had not been affected and it saw minimal risk of attacks on its employees.
"I can't say we won't pull out any staff, but until now we have no plans to do it," a senior manager for corporate communications said earlier this week.
"The security authorities have provided continued assurance that our operations in Papua are secure," he added.
Some analysts suggest that if the situation in Indonesia deteriorates further, fears of possible copper concentrate bottlenecks could encourage renewed fund short-covering.
This had probably contributed to the recent rally in copper prices, they added.
"I wonder if there has been a bit of speculation in the market yesterday (Thursday), which was one of the reasons the copper market was a bit stronger than the others," said Lawrence Eagles, analyst at GNI Research.
Three-months copper rallied to a high of $1,533.50 a tonne on Friday, its highest level since 13 September, but drifted in the afternoon to end at $1,511.
Other analysts said news of the terrorist attack had only had a minimal impact on the copper price.
"I am very cautious of pinning a rise of $30 on something as specific as political concerns of supply from Indonesia," said Merlin Marr-Johnson at HSBC.
"Obviously it is a factor, a kneejerk (reaction), people are short (and when) news comes out they cover," he added.
Another analyst said that the Grasberg mine was situated some 1,500 miles away from Bali and was not a place where one would expect terrorist attacks. (*)