Reports indicate copper mines and ports are in good shape. The futures market seems to be overreacting.

Copper futures just opened an hour ago with a 6% pop from Friday’s close, up to just under $3.50 per pound. Traders are concerned about a supply pinch, since Chile produces 36% of the world’s copper. Bloomberg reports that four mines representing 16% of the country’s supply have been at least somewhat impaired:

Santiago-based Codelco, the world’s biggest copper producer, is restarting operations at its El Teniente mine after output was halted by the quake, which also closed its Andina mine. The two projects produce about 600,000 tons of copper. London-based Anglo American Plc said Feb. 28 power had been “partially restored” to its Los Bronces and El Soldado mines in Chile, which produce a combined 280,000 tons a year. The two mines stopped output on Feb. 27.

The mines were closed because of power outages, the two companies said. A rockfall also caused damage to a slurry duct at the Andina mine, Codelco said.

Codelco said the quake didn’t cause any significant damage to installations at El Teniente and it may open its Andina mine “in the coming hours.”

Power to the two Anglo American mines was “partially restored,” spokesman Pranill Ramchander said in e-mailed comments that didn’t give further details.

Ports Closed

Chile’s earthquake also severed the country’s main highway and destroyed bridges and apartment buildings.

The central Chilean ports of San Antonio and Valparaiso remain closed after the earthquake, TVN reported, without saying where it got the information.

Expanding copper inventories provide a cushion for supply disruptions, said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt.

“The exchange stocks worldwide are still very high and the market was in oversupply before the earthquake,” he said. Prices may still rise $200 a ton as traders switch focus from demand to “supply risks,” he said.

Also see this report from Reuters with much more detailed info on particular ports and mines.

It sounds like the miners have things under control and that the market is probably overreacting. This is Chile — they can handle earthquakes. The market isn’t going to be short of copper. It seems like we’re talking about 5% of world supply being down temporarily.

Demand is slack, and London warehouses are chocked full of the stuff (as are those in China), with the equivalent of almost a year’s worth of Codelco’s production:

-

Technically, the market looks weak, and a blip like this is probably not going to jump-start the bull unless the Chilean situation is much worse than it appears:

-

I view this as an opportunity, and I have taken a short position tonight.

(UPDATE): Codelco says it will meet its delivery contracts