The next couple of years were supposed to be a time of plenty for copper, thanks to a series of big new projects starting up around the world. The expectation across most of the industry was for a comfortable surplus before the market tightens again later this decade, when surging demand for electric vehicles and renewable energy infrastructure collide with a lack of new mines.
Instead the mining industry has highlighted how vulnerable supply can be — whether due to political and social opposition, the difficulty of developing new operations, or simply the day-to-day challenge of pulling rocks up from deep beneath the earth.
In the past two weeks, one of the world’s biggest copper mines was ordered to close in the face of fierce public protests, while a slew of operational setbacks has forced one of the leading miners to slash its production forecasts.
The sudden removal of around 600,000 tonnes of expected supply would move the market from a large expected surplus into balance, or even a deficit, analysts say. And it’s also a major warning for the future: copper is an essential metal needed to decarbonise the global economy, which means mining companies will play a key role in facilitating the shift to green energy.
While the price reaction to the supply disruptions has so far been muted – amidst ongoing worries about China’s property sector – any sign of demand recovery would hit a tight market.
Last week, Panama’s government formally ordered First Quantum Minerals to end all operations at its $US10 billion copper mine in the country. The order followed weeks of protests and political wrangling that came to a head when the country’s Supreme Court invalidated the law that underpinned its mining license. The giant Cobre Panama can produce about 400,000 tonnes of copper a year.
As the market was digesting the news that one of the biggest mines was closing (at least for now), Anglo American delivered its own production bombshell on Friday with the announcement that it will slash production from its flagship copper business in South America.
While problems at its platinum and iron ore mines in South Africa were well publicised, the copper cuts caught investors off guard, sending the company’s shares plunging by 19 per cent. Anglo has reduced its copper production target for next year by about 200,000 tonnes, essentially removing the equivalent of a large copper mine from global supply. Production will fall even further in 2025.
