Supply Resumes But Copper Prices Hold, MMI Only Falls a Point

Copper prices continued to trade flat in March. Over this month, strikes at major mines Escondida and Cerro Verde ended while Freeport-McMoran got a temporary export permit for its Grasberg mine.

Escondida’s Strike Ends

The strike at the world’s largest copper mine, Escondida in Chile, ended at the end of March. It took 44 days for the company to reach an agreement with workers, much longer than expected.
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It will take time for the mine to ramp up output back to pre-strike levels. According to Platts, on April 26, Owner BHP Billiton will outline the impact of the strike on Escondida’s output. It is estimated that the mine have lost around 200,000 metric tons in production because of the strike.

According to CNBC, workers at the mine voted to return to work, despite not having reached an agreement on a new pay deal with management. Instead, workers extended their existing contract by 18 months and they will be able to renegotiate a new deal in 2018 after a new pro-union law in Chile goes into into effect.

Cerro Verde Mine Resumes Operations

According to a recent Commodity Insights article, Cerro Verde, the largest copper in Peru, has only been operating at 50% of capacity due to a strike that began on March 10. At the end of March, workers signed an agreement providing for more generous health care benefits as well as a profit share earlier than in previous years. The mine produced just under half a million mt of the red metal last year.

Grasberg Mine Gets Temporary Export Permit

Reuters reported that Freeport-McMoran was granted a temporary permit to export copper concentrates from its Grasberg mine in Indonesia, the world’s second largest copper mine. The new permit broke a 12-week deadlock that had cut supply to Asian smelters. The new export license will last eight months. The amnesty means the company can renew deliveries of copper concentrates in Asia after declaring force majeure in February, but longer-term discussions over the company’s rights in Indonesia have yet to be determined.

What This Means For Metal Buyers

Copper supply disruptions have lasted longer than expected. Although they seem to have come to an end, their impact on supply still need to be outlined. In addition, these strikes have set the case for wage negotiations across the industry.
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Some major contract negotiations in large mines are due in the coming months. In the meantime, copper investors might focus their analysis on macro factors such as the ongoing China-U.S. trade negotiations, the performance of the U.S. dollar and global demand for industrial metals.

Actual Copper Prices and Trends

The Japanese copper primary stayed flat at $6,075 per mt. Indian copper prices fell 2%, finishing the month at $5.92 per kg. Prices in China also fell 2% to $6,878/mt. The three-month London Metal Exchange primary copper finished the month at $5,880/mt, down 1% from last month.