Copper Drops as Indonesia Recommends Freeport Export Permit

  • Bloomberg World Mining Index of shares slides as much as 2.4%
  • Goldman Sachs analysts call recent rally unjustified

Copper futures declined the most in almost a month as Indonesia recommended Freeport-McMoRan Inc. resume shipments from one of the world’s biggest sources of the metal, boosting available supplies at a time of global surplus.

Indonesia’s Energy and Mineral Resources Ministry issued a recommendation for Freeport to renew its export permit that will pave the way for the company to resume shipments from its Grasberg mine. That means there will be no repeat of an export ban that had affected concentrate availability, Leon Westgate, an analyst at ICBC Standard Bank Plc in London, said by e-mail.

PT Freeport Indonesia, the company’s local unit, expects to get the export permit soon, spokesman Riza Pratama said. The company sought renewal of the permit, which expired on Jan. 28, to export 1 million metric tons of concentrates over the next six months. Copper prices have dropped 21 percent in the past 12 months as production topped consumption amid slowing demand from China, the biggest global user.

“While Indonesia’s recommendation to Freeport is probably not a huge surprise, it is perhaps bearish,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “This action removes the likelihood of an interruption of material coming out of Indonesia.”

Copper futures for March delivery dropped 2.4 percent to settle at $2.0395 a pound at 1:13 p.m. on the Comex in New York, the biggest loss since Jan. 11. Copper also retreated on the London Metal Exchange, along with aluminum, nickel, lead and zinc. Tin rose.

Goldman View

Metals and mining shares fell as Goldman Sachs Group Inc. said a recent rally was “unjustified.”

Copper futures climbed in the past three weeks, the longest rally since late March. Expectations that the Federal Reserve would hold off from continuing to raise U.S. interest rates had pushed the dollar lower and raised the appeal of metals as alternative assets. The Bloomberg World Mining Index jumped 8.2 percent last week, adding more than $38 billion to the combined value of the 80 companies tracked by the measure. The gauge fell as much as 2.4 percent on Tuesday.

“We view this rally as unjustified given the supply-demand picture remains unchanged,” Goldman said. The bank cut its recommendation on Antofagasta Plc and First Quantum Minerals Ltd. to sell and maintained the same rating on Anglo American Plc and Rio Tinto Group.

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