Copper Goes Ballistic As A Shortage Meets An Outage

BHP hits record high

BHP shares have risen 25% on the ASX over the past six weeks, hitting a record high of A$60.23 ($43.36) earlier today. The stock has gained 56% in the past 12 months.

Rio Tinto also hit an all-time high of A$185.50 earlier today.

Strong demand for copper in traditional markets such as construction, electronics and transportation comes as buyers snap up stocks as they lose confidence in global supply chains, which are being affected by “blackouts” at major mines.

The latest thing to boost copper prices was reports last week that Indonesia’s giant Grasberg mine may be delayed by 12 months from a previously announced full re-rating date of early next year to early 2028.

The U.S.-based operator of the Freeport McMoRan mine later disputed reports that one of its Indonesian executives had proposed an extension, saying it would stick to an early 2027 restart deadline.

The mine has been operating at about 45% capacity since a catastrophic mudslide last September killed seven workers and blocked the mine shaft.

Before the outage, Grasberg’s copper production was 1.7 billion pounds per year. Since the debris flow, the weight has been reduced to about 700,000 pounds.

Not just Grasberg

Grasberg has ceased production following the closure of the Cobre Panama mine in Panama and the power outage at the Kamoa Kakula mine in the Democratic Republic of the Congo.

Copper supplies are dwindling as demand increases from the rapid electrification of the transportation industry, where electric vehicles are replacing internal combustion engine vehicles.

But the immediate issue that worries copper consumers the most is the impact of stockpiles on supply, as well as the blockade of the Strait of Hormuz, which limits the supply not only of oil but also of sulfuric acid produced as a by-product of oil and essential in some copper refining processes.

Stockpiles are another factor contributing to the global copper shortage, as major users and some governments stockpile the metal in case supplies dry up, as the Iran war has hit oil supplies.

The United States is among countries stockpiling copper for emergencies, prompting investment bank Morgan Stanley to report last month on the market-distorting impact of inventories.

Project library

The bank said U.S. copper inventories accumulated as part of the country’s Project Vault are viewed by the market as strategic reserves.

Whatever the explanation, today’s copper market is certainly an unusual one, with overall global inventories reportedly at record highs and prices hitting record highs, which is something that shouldn’t happen in commodity markets.

Rio Tinto chairman Dominic Barton pointed out a series of unusual events at the copper mine at the company’s annual meeting in Perth, Australia, last week.

Barton said rising geopolitical tensions have increased demand for minerals and metals.

“I don’t know if we’re close to a world war, but I certainly think the complexity, the intensity of change and the level of fragmentation are certainly at a level they haven’t been in 50 to 60 years,” he said.

“This is a very turbulent time. Part of that is understanding nationalism. Everybody wants to have manufacturing in their own country. They want security of supply. Everybody wants minerals for their own use.”