Fitful at 42

The news broke quietly on New Year's Eve. A wire-service report announced that Belgian-controlled Union Miniere du Haut-Katanga, which annually mines 314,000 tons of copper in the Congo, was increasing the price of the metal from 380 a pound to 420.

The wire-service reporter had learned of the hike from Union sources in London, but the Union decision had been so sudden and quiet even within the company that executives, asked for corroboration over the weekend, denied any knowledge of it. The denial made no difference. Whether because it wished to re-emphasize its position as a pace-setting copper producer or because of some genteel arrangement whereby it drew the task of moving first, Union had decided on a price hike. Within two days, companies in two other large copper-producing countries, Chile (560,000 tons annually) and Zambia (750,000 tons annually) upped their price to 42-c- also. Smaller copper countries followed suit, and last week the 40 increase had settled fitfully on the copper industry.

Too Much to Resist. Such turmoil and tortured fluctuations are the standard bill of fare for copper. Of the major metals, it has long had one of the most unstable world market prices. In 1956 that price hit an alltime high of 45 7/8-c- a pound. By 1958 it had sunk to 24 4/5-c-. Speculation on copper futures ran amuck, and in desperation producers accounting for 70% of the free world's copper supply informally banded together to provide an artificial stability in the form of a set world price. Still copper's willful ways seemed uncontainable. A year ago, the companies pegged their price at 32 1/2-c-, Then, in May, they saw fit to let it hop to 36-c-. In November 20 more were added--except for companies producing and selling within the U.S., which rolled back to the 36-c- line at President Johnson's urging. And now, less than three months later, the "fixed" world price had come unstuck again.

In at least one way, the raise made good old supply-and-demand economic sense: the simple fact is that the world requires more copper than is being mined. And as it has in many other fields (see U.S. BUSINESS), the Viet Nam war has been making additional demands on the already strained copper supply. The supply is also being threatened by strikes in Chile, the possibility that Rhodesia will cut off neighbor Zambia's supply routes and, as ever, the unsure state of Congo politics. Such a sellers' market was too much to resist for Chile, Zambia and the Congo, all of whose developing economies are largely based on the metal.

"I'm Shell-Shocked." Companies like Anaconda and Kennecott, which both have giant mines in Chile, are not so happy about the increase. They remember that, in the volatile copper market of the past, exorbitant prices have driven buyers to find--and stay with--such substitutes as aluminum and plastics. And if the "fixed" 42-c- price is high, the uncontrolled price is even higher. The large companies, which set their own price, normally sell only to large and regular customers; smaller buyers must compete for the remaining 30% of the copper supply on commodity markets like the London Metal Exchange, where last week copper was trading at up to a nearly prohibitive 71-c- a pound.

Watching all of this from the sidelines, where they have had to remain ever since they held at 36-c-, U.S. companies have mixed feelings about not being where the action is. Their huge annual 1,300,000-ton production is swallowed by U.S. buyers. Still, they would be delighted to have a few more pennies in their pockets. And the size of last week's increase slightly blurred their memory of last November when President Johnson waylaid their attempted 2-c- increase by dumping 200,000 tons of Government-stockpiled copper. "I'm shell-shocked that it went up so much," said one U.S. executive about last week's development. "I still don't know which way we're going." Just to help him and others realize that they were not going anywhere, President Johnson announced that he would seek congressional authority to sell off 200,000 more tons on the domestic market.

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