Grasberg lifts copper price to near 3-month high

The spot copper price raced ahead on Friday, jumping to a near 3-month and capping a 2.2% weekly gain.

Spot, or so-called front-month futures contracts were last trading at $3.35 a pound on the Comex division of the New York Mercantile Exchange, the best level since September 19.

Trading in immediate delivery copper has been particularly tight with the LME cash price for the red metal surging to a $14.50 premium over the 3-month contract yesterday, a close to 18-month high before easing back to $8 on Friday.

The spot market for copper has been supported by LME Warehouse levels which continue to shrink. On Friday headline inventories fell by more than 3,000 tonnes to 393,000 tonnes, down from 678,000 tonnes hit mid-year.

Three-month copper on the London Metal Exchange on Friday touched its highest level since November 1, of $7,265.25 a tonne, while gains on the most active traded March 2014 future on Comex were also more subdued at $3.32 a pound.

Also lending short-term support to copper – considered a bellwether for the metals industry – is uncertainty surrounding output from Freeport-McMoRan Copper & Gold (NYSE:FCX) giant Grasberg mine in Indonesia.

The US company is working to get permission from the Indonesian government to keep shipping concentrate ahead of a January 1 ban on all exports of unprocessed metal from the Asian country.

Production at Grasberg, the world's largest gold and second-largest copper mine with output of 1.1 billion pounds and 1.2 ounces of the metals, will have to be slashed to 30% – 40% of capacity if a ban is imposed according the Freeport.

Also boosting the price is robust demand from China.

Copper imports into China, the world's top consumer of the metal which is responsible for 42% of the seaborne trade, reached 435,600 tonnes in November, up 7.1% from October and up more than 19% from a year earlier.

Total imports of the metal in the first 11 months is still showing a decline of 4.8% compared to last year at to 4.1 million tonnes, according to customs date out earlier this week.

In November refined-copper output in China rose 28% from a year earlier to 654,000 tonnes, according to data from the National Bureau of Statistics. That was 2.7% more than the previous record set in October of 637,000 tons a month earlier.

The copper price remains down 7.2% this year after recovering from near three-year lows of $3.04 a pound struck at the end of June. The copper price peaked above $4.50 a pound in February 2011.

While demand for copper have remained stronger than previously predicted for 2013 the price is expected to come under pressure as massive new supply starts hitting the market.

For the past seven years annual supply growth has been essentially static falling to as lows as 0.4% a year in 2010 to 2011.

This year growth in copper mine supply is set to jump by more than 5% and accelerate further in 2014, topping 6% and averaging over 4% through 2016.