Copper spikes after Chile quake

NEW YORK (CNNMoney.com) -- Copper prices surged overnight after a massive earthquake struck Chile, the world's largest producer of the metal, over the weekend.

May copper surged 6.2% to a high of $3.487 a pound early Monday, before easing to $3.343 a pound.

Prices spiked after a magnitude 8.8 earthquake struck off the central coast of Chile before dawn Saturday, causing widespread devastation in the country that provides about one-third of the world's copper supply.

But analysts said the initial spike was overdone, since the majority of Chile's copper industry is concentrated in the north, which was less affected by the quake.

"The human toll from the earthquake in Chile is of course very significant," said Jon Barnes, a copper market analyst at CRU Strategies in London. "But the actual impact on the copper mining sector will be probably be rather minimal."

Barns called the surge in copper prices a "knee-jerk reaction." However, he said there is still some potential for some supply disruptions, given the damage to Chile's infrastructure. "No one has a complete picture of how much production has been affected."

Codelco, Chile's state-owned copper mining company, said operations at its El Teniente mining division had resumed Sunday after closing early Saturday due to power outages. An investigation found limited damage.

Operations will gradually resume at its Andina division later Monday, according to a statement on Codelco's Web site.

British mining giant Anglo American said power has been partially restored to its four copper mining operations in Chile, which had been shut down over the weekend. "We are targeting an efficient resumption of full production as the situation allows," said Cynthia Carroll, Anglo American chief executive, in a statement.

Chilean officials estimate that some 2 million people have been affected in one way or another by the earthquake, while 708 have been reported dead. The Chilean Red Cross reported that roughly 500,000 homes had sustained considerable damage.

In the days since the quake struck, Chile has suffered more than 90 aftershocks, ranging from 4.9 to 6.9 in magnitude. A 6.2-magnitude aftershock was recorded near the earthquake's epicenter Sunday.

Meanwhile, the rally was also tempered by a stronger U.S. dollar, which weighs on prices for commodities that are priced in the U.S. currency.

The dollar index, (DXY) which gauges the greenback against a basket of currencies, was up 0.77% to 81.04.

"In the short term, currency movements and global confidence in financial markets seem to be dictating what's happening in the copper market," Barnes said.