[SMM Analysis] frequent accidents in South American mines, why copper prices are low and weak

SMM10, 17 March:

There have been a number of large mine accidents in South America this week. On October 14, Mirador, Ecuador's largest copper mine, announced that it had begun restricting production affected by local protests. On the same day, Teke Resources and Antofagasta respectively said that their Carmen copper mine and Antofagasta copper mine were on strike. On October 15, Minmetals informed trader Las Bambas of force majeure and later said that 90 per cent of, Las Bambas copper equipment had ceased work due to fuel supply shortages. On Oct. 15, workers went on strike at five copper mines and refineries owned by Asarco, affecting a combined capacity of about 1.3 million tons per year.

In recent years, the supply of copper mine is already tight, this year copper concentrate spot TC continues to decline to aggravate the market concern about the supply of raw materials. Recently, there have been a series of accidents in overseas mines, and expectations of tightening copper supply should have provided support below the copper price and even pushed the copper price low to rebound. However, copper prices failed to stand firm after breaking the pressure above 47000 yuan / tonne this week. And fell below all EMA support. Why is copper still low when supply is good?

The fall in copper prices this week was mainly dragged down by weak macroeconomic data and repeated Brexit negotiations, according to SMM analysis. Fundamentals, before the National Day for the "gold nine silver 10" copper consumption expectations are too full, in more than half of October, copper processing materials enterprise orders have not been significantly improved, the demand side continues to be weak, after the festival gold nine silver 10 consumption is less than expected, the domestic accumulation trend is obvious, the domestic rising water also fell sharply compared with before the festival, the weakness of the consumer end suppresses the further upward power of the copper price. Even if mine accidents occur frequently, it will be difficult to boost bulls' mood.

In the short term, even if tensions remain at the supply end of the copper concentrate, the benefits for the copper price will still be limited, and the transmission from the raw material end to the electrolytic copper supply end will take some time to ferment, at the same time, the global economic slowdown and the resulting weakness on the demand side will still be the biggest obstacle to the upward impact of copper prices. Copper mines are expected to continue to grow at a low rate next year, and if downstream demand improves to a certain extent, the supply side will provide a rebound in copper prices.