Earthquake in Chile will rise copper prices

SINGAPUR (Reuters) - Copper prices would rise at the start of market operations on Monday, driven by uncertainty over the supply after a strong earthquake that struck Chile on Saturday, dealers and analysts said Sunday.

The earthquake of magnitude 8.8 and one of the world's largest in a century, left in the copper-producing country more than 300 people, toppled buildings and triggered tsunami alerts to places as far away as Japan and Russia.

The quake forced the suspension of up to one fifth of the copper mining capacity in Chile, estimated at around 4.5 million tonnes copper in concentrate annually. Government officials say that exports would continue without difficulty, and market watchers said that prices would rise when booting operations on Monday.

"The sensitivity of copper, Chile is similar to the sensitivities about the tensions in the Middle East. The copper market is already tight and this could accentuate this state," said senior analyst at ANZ basic, Mark Pervan.

"And even if the mines have not been directly affected, there are a case linked to infrastructure-roads and pathways that may have been damaged," he added.

The state mining company Codelco halted operations at its El Teniente and Andina mines, which could resume work later on Sunday, and Minister of Energy and Mines, Santiago González said it could take two days to resume production.

Gonzalez said that Codelco had sufficient inventory to meet its export commitments and a union leader said the key ports of Antofagasta and Mejillones exporters were operating normally, although the small port of San Antonio was closed.

The mines Los Bronces and El Soldado, Anglo-American, which together produce about 280,000 tonnes of copper per year, also suspended operations, but other major mines operating normally.

"The situation is still changing and I do not anticipate the market 24 hours before they open, but there is great uncertainty about conditions in Chile and this typically results in higher prices," said a dealer in Singapore.

"The government has said that shipments will continue as normal but people will try to source the metal (...) and also maybe we will see some narrowing in the 'spreads' the London Metal Exchange," added .

Copper prices rose 140 percent last year but have fallen about 36 percent so far in 2010.

(Additional reporting by Alonso Soto in Santiago )