Perfect storm for copper
3rd April 2020
Resources Rising Stars
Wood Mackenzie believes the disruptions in the copper market will escalate as the COVID-19 pandemic unfolds (reports MiningNews).
Major copper producing countries Chile and Peru have called a state of emergency, with mines forced into suspension for at least 15 days.
WoodMac said a 15-day shutdown of copper mines in those countries would see 1.5% of supply removed from the market this year.
"However, we believe there is a significant risk that disruptions will escalate, and breach 5% this year," WoodMac research director Nick Pickens said.
WoodMac stressed that was a worst-case scenario and would have "catastrophic consequences" for mine supply.
The copper price has fallen from over US$6000 per tonne earlier this year to about $4700/t currently.
WoodMac said the current price was below the 90th centile of the industry cost curve, which could make shutdowns more permanent.
"Our mark-to market analysis suggests that at current market oil prices and exchange rates, the 90th centile of the C1 plus capex cost curve will fall by nearly 25c/lb when compared to 2019," Pickens said.
"Furthermore, a prolonged period of lower average oil prices will have a more extensive deflationary influence for other raw material costs, and the impact could be more significant."
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