Copper rises; Peru mine arrest increases supply problems

(Bloomberg) Copper was rising along with other base metals as disruptions in Peruvian mines added to concerns about supply shortages at a time when inventories are at alarmingly low levels.

Operations at two mines that account for about one-fifth of Peruvian copper exports are suspended, helping to keep prices close to record levels. The incidents, which demonstrate that global mining activities remain at risk of disruption due to labour disputes and community instability, have increased supply concerns, when inventories of the London Metal Exchange are close to lowest levels in more than 16 years.

MMG Ltd. reported that Las Bambas, one of Peru's largest copper mines, will not be able to continue production in the face of local community protests over alleged non-compliance with its social investment commitments, according to a document submitted to the Hong Kong Stock Exchange. On the other hand, a strike continues at Southern Copper Corp.'s Cuajone mine, which began on February 28 after community members cut off water supplies.

Copper rose 0.7% to US$10,387 a ton at 1:24 p.m. on the London Metal Exchange. In the previous two weeks, the metal had dropped.

While global mining supply is generally recovering from the pandemic as logistics improve, increasing refining margins, production of refined copper is lagging behind. Refined copper production growth in China slowed in the first two months and March volumes are expected to decline after a major smelter stopped production following financial tensions.

“Both miners and smelters have faced headwinds,” analysts from Bank of America Corp., including Michael Widmer, wrote in a note. “While some of these can be normalized to some extent, headwinds in particular for refined production have supported copper prices.”

LME copper inventories increased on Tuesday, driven by additions to wineries in South Korea and Taiwan. While stocks have recovered somewhat after touching the lowest level since 2005 in March, they remain historically low.

Contributing to the general sentiment, investors expect more stimulus from China, the largest consumer of metals, for the infrastructure and real estate sectors. Authorities have repeatedly promised to prop up the economy after being affected by the worst outbreak of covid-19 since the pandemic began.

Domestic operators are also watching for signs of recovery in demand, as Shanghai eased transport restrictions and unveiled plans for the return of major manufacturing industries after weeks of lockdown.

Original Note:

Copper Climbs as Peruvian Mine Halts Add to Supply Concerns

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