Copper MMI: All Eyes on Labor Negotiations at BHP’s Escondida Mine

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Charles/Adobe Stock

In August, the Copper Monthly Metals Index (MMI) fell by four points. The Copper MMI has continued to slide, mainly driven by weaker LME copper prices in July. The current Copper MMI stands at 77 points.

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The recent slide in copper prices has been driven by concerns over Chinese growth. Analysts commonly call the base metal “Dr. Copper” because of its strong correlation with the Chinese stock markets. Therefore, Dr. Copper serves as a reflection of the Chinese economy.

However, copper prices appear to have begun to stabilize and are currently trading more sideways. Prices appear to be in a buying dip.

Source: MetalMiner analysis of Fastmarkets

However, fundamental supply issues may add support to copper prices.

The world’s largest copper mine, the Chilean Escondida mine, may get shut down due to a strike. The strike comes as a result of failed negotiations between BHP Billiton and the labor union representing the workers at the mine. The labor union gave the company an ultimatum with a deadline to go on strike. The company could improve the contract offer before Aug. 6.

According to a Reuters report, BHP requested government mediation in the talks with the union, temporarily delaying a potential strike.

Last year, the Escondida mine workers went on a 44-day strike that reduced copper output by 200,000 tons.

Supply disruptions remain a concern elsewhere, as well.

Other mines, such as the Chilean Caserones mine, failed to conclude contract negotiations. Codelco’s Chuquicamata copper mine, the state-owned miner’s second-largest in the country, blocked access to the mine in early August.

Chinese Scrap Copper

LME copper prices and Chinese copper scrap prices tend to follow the same trend. Both appear in a long-term uptrend. However, both LME copper and scrap copper prices fell again this month. In July,copper scrap prices fell  less than LME copper prices.

Despite both following the same short-term downtrend, the spread has widened. The wider the spread, the higher the copper scrap consumption — and, therefore, the price.

Source: MetalMiner data from MetalMiner IndX(™)

The spread seems to have tightened again.

What This Means for Industrial Buyers

Despite the recent dip, LME copper prices remain in a long-term uptrend.

Buying organizations will want to be prepared to understand how to react to the latest copper price movements. For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

Actual Copper Prices and Trends

In August, most of the prices comprising the Copper MMI basket decreased.

LME copper fell by 6% this month. Indian copper prices decreased by 5%, while Chinese primary copper prices also fell by 5%.

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Prices of U.S. copper producer grades 110 and 122 decreased by 3.76%. Meanwhile, the price of U.S. copper producer grade 102 fell by 3.58%, down to $3.77/pound.

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