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| Copper |
Copper prices surged nearly 2% on Thursday, driven by ongoing concerns over global mine production struggles. One of the world's leading copper producers, Chile's Antofagasta, gave a conservative production outlook, adding to the market's existing supply worries. This price surge comes at a time when the copper market is already grappling with disruptions in major mining operations worldwide.
Supply Concerns Push Copper Prices Higher
Copper prices jumped as much as 1.7% to surpass $10,800 per tonne on the London Metal Exchange, while three-month contracts on the COMEX rose 1.9% to $5.10 per lb., equivalent to $11,250 per tonne. The metal, which is essential for renewable energy, electronics, and construction, has surged more than 20% this year, primarily driven by a series of significant mine disruptions.
Notably, in August, major incidents occurred at Chile’s El Teniente, the world's largest underground mine, and Indonesia's Grasberg mine, both of which are key copper producers. These events have exacerbated fears over supply shortages, causing copper prices to rise. Analysts are now concerned that additional disruptions could further push prices up, adding fuel to the bullish outlook in the copper market.
Antofagasta’s Conservative Outlook and Goldman Sachs' Bullish View
Antofagasta, one of the largest copper producers globally, recently lowered its production forecast, signaling potential future shortages. The company stated that it expects to hit the low end of its 2025 production target, and its 2026 copper production guidance fell short of analysts' expectations. This news came as a setback for those hoping for a stabilization of the global copper market.
At the same time, Goldman Sachs has taken a bullish stance on copper prices. According to the bank, discussions with industry participants during the LME Week conference suggest that copper prices could test all-time highs in the near term. The U.S. import tariffs on copper have created a significant arbitrage opportunity, driving prices in New York to a record high of $5.732 per lb. in July.
Goldman Sachs analysts predict that once copper prices breach $10,900 per tonne, investors will likely increase their positions, pushing the market higher. The bank also noted that the favorable arbitrage between COMEX and LME copper prices is tightening the physical market, especially in the U.S. This tightening may pose a temporary upside risk to LME copper prices, which are expected to range between $10,000 and $11,000 in the near term.
ScrapInsight Commentary
The combination of major mine disruptions and conservative production forecasts from key suppliers like Antofagasta is fueling concerns over copper supply, driving prices higher. With Goldman Sachs projecting potential price tests of all-time highs, the copper market could see continued upward pressure, particularly with favorable U.S. import conditions.
