The International Copper Study Group—or ICSG— has just said the world can expect a supply shortfall this year after predicting a surplus just last April. That’s huge news.
Copper mining has always faced disruptions given the often remote, challenging places it happens in, but this year is a standout. From projecting a 209,000-ton supply surplus earlier in the year, the ICSG says the world now faces a 150,000 metric tons shortfall.
The reason is that a string of recent accidents at a number of the world’s largest copper mines has created production shortfalls which will begin to bite by next year.
Ivanhoe Mines’ Kakula mine in Africa was hit by earthquake activity and flooding in May, Chilean state producer Codelco’s El Teniente mine suffered a fatal collapse in July, and Freeport-McMoRan’s Grasberg mine in Indonesia was inundated by mud in September.
Grasberg was particularly devastating. The colossal 800,000-ton mud rush that swamped the mine brought human and economic costs. It has also stopped all production, with Freeport indicating the mine may not return to pre-accident operating rates till 2027.
Grasberg is the world’s 2nd-largest copper mine after Escondida in Chile and last year it produced 815,000 metric tons or 4% of global output. It’s a big hit to an already stretched supply chain and another reason the London Metal Exchange copper price jumped to a 15-month high.
The ICSG now expects growth of only 1.4% in mine supply, down from its previous forecast of 2.3%. I believe however, that many analysts think that could even be a conservative call.
Copper has always been a dynamic market, but these latest hits to supply are significant and will no doubt also impact smelter activity, prices, deals, exploration and of course world economic health. It means the fragility of copper supply is one we all need to be concerned about.
Cheers, John Fennell
