Copper prices were further buoyed by the prospect of a Labour strike at the world’s largest copper mine in Chile, which threatens already low global supplies.
As a result, copper prices on the London Metal Exchange rose on Wednesday, climbing as high as $10,015 a tonne.
The union representing workers at BHP Billiton’s Escondida and Spence copper mines has rejected the company’s contract offer and called on its members to strike from Thursday. The sticking point in the negotiations is that workers are demanding to be considered part of the production chain and therefore eligible for output bonuses.
Escondida, the world’s largest copper mine, produced 1.19 million tonnes in 2020, while Spence produced 146,700 tonnes, representing a combined total of about 24 per cent of Chile’s 5.7 million tonnes. Chile is the world’s largest copper supplier, with 28.5 per cent.
“If there is a strike at the Spence and Escondida mines, it will be a problem for the market,” said Jonathan Barnes, copper analyst at commodity supply chain intelligence firm Roskill.
Barnes said there are a number of other risks to copper supplies, including uncertainty over Chile’s new constitution, royalties for Chilean mining rights and a poll lead in Peru for a candidate who wants to implement new mining taxes and royalties.
“All of this is causing mining companies to be reluctant to invest because of the uncertainty, and at a time when the world is desperate for copper, there is no major supplier to respond,” Barnes said.
In March, Chile’s Congress passed a bill that would raise taxes on copper, lithium and other miners, from 3 percent to 10 percent for large producers if the decree is formally issued.
“The fundamentals remain supportive, with concerns rising about copper supply disruptions in South America due to Labour talks and elections.” “Said a Singapore-based copper analyst. “Copper demand remains weak but the premium may have hit bottom. Previous price drops have also sparked interest from end users in restocking. Strong contango is also good for traders’ long and carry strategies.”
In addition to lingering concerns about mining investment, the epidemic in Chile remains severe, with about 6,000 new confirmed cases a day, posing a potential threat to copper supplies. The country’s Ministry of Health announced on April 26 that the border closure would be extended for another 30 days until May 30.
In addition, the dollar is still near five-month lows, making dollar-denominated metals cheaper for holders of other currencies, which could boost demand for copper.
Higher copper prices and a weaker dollar have led to a sharp cost increase for Chinese exporters. Power cord manufacturers, for example, have been forced to raise prices to cope with losses due to higher prices for cables and plug parts.
Post time: May-27-2021