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General Market Commentary
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General Energy
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General Market Commentary
On Copper: “We wouldn’t rule out the potential for other strike-related losses”
Production disruption looks likely to underpin a breakout period for copper over the next 18 months, if comments by BMO Capital Markets analyst Alex Terentiew are anything to go by.
In a note this week titled ‘Copper – Knocking Down the Podium’, he said copper had started this year positively as disruptions had supported prices at levels 20% above the 2016 average.
Escondida, the world’s largest copper mine with 5% of mine supply, left the market short 200,000 tonnes after a 44-day strike that ended last Friday, while producers two and three, respectively, Grasberg (Indonesia) and Cerro Verde (Peru), have cost the market 80,000-90,000t through a licencing dispute and industrial action.
“[This year], is on track to deliver the largest disruption to initial production estimates since 2008,” Terentiew said.
“Since 2004, we estimate that strikes have reduced annual mine supply by an average of 115,000t per annum, with 2009 the highest year at 309,000t and 2017 by our estimates already at 203,000t.
“Assuming average disruption allowances since 2004 for items such as technical issues, weather, or grades are repeated in 2017, then even if Escondida, Grasberg, and Cerro Verde return to normal today (unlikely in the case of Grasberg at least), we estimate a 6.3% disruption allowance (relative to our December 19, 2016, forecast).”
But it won’t end there, Terentiew reckons.