This article was originally published on 29 November 2023.
The global copper market faces uncertainty as doubts arise about the reliability of output from two major Latin American mines in Panama and Peru.
The sudden emergence of doubt came after Panama's top court ruled on Tuesday that Canadian miner First Quantum's contract to operate the Cobre Panama mine is unconstitutional, while a union representing half of the workers at Peru’s Chinese-owned Las Bambas mine went on strike.
Analysts state that Cobre Panama produced 776,000 tonnes of copper last year but very little this year due to disputes over the mining agreement, legal challenges, and protests. First Quantum has suspended commercial production from Cobre Panama and placed it on care and maintenance as they awaited the court's decision.
Las Bambas, controlled by Chinese groups MMG (62.5%), Guoxin International Investment Co. Ltd (22.5%), and CITIC Metal Co. Ltd (15.0%), produced over 254,000 tonnes of copper last year, with interruptions due to protests.
Reduced supply from these two mines may lead to a copper market deficit next year or at least tighten oversupply if the disruptions are not resolved soon. If the Cobre Panama mine were to be permanently shut, it could move the market into deficit in 2024, according to Macquarie analyst Alice Fox.
However, if it remains out of operation until Panama's May 2024 presidential election, it would result in a loss of approximately 40,000 tons of copper this year and 160,000 tons next year, according to her estimate. This could lead to a small deficit this year but could be absorbed by the market next year, providing some support to prices.
Reuters' latest poll of analysts forecasts an oversupply of 302,500 tons of copper in 2024. Bank of America's 2024 base-case scenario sees the global copper market surplus at 150,000 metric tons, including 370,000 tons from Cobre Panama, 200,000 tons of production increase from Las Bambas, and a 6% disruption allowance. Losing any of these tonnages could push the market closer to a deficit.
Copper is expected to benefit from the green energy transition in the coming years, but its price has only risen 1.2% this year due to China's weak post-pandemic recovery and concerns about economic growth elsewhere. The Comex price rose 1.4% on Tuesday to $US3.84 a pound, the highest settlement since April.
