International copper prices recorded their largest single-day gain in over five months, as mining giant Freeport-McMoRan Inc. declared force majeure at its giant mine in Indonesia.
Specific market data showed that the three-month copper price on the London Metal Exchange (LME) rose by 3.2% at one point, reaching $10,297.50 per metric ton, marking the largest intraday gain since April 10.
At the same time, Freeport-McMoRan's stock price fell more than 10% in U.S. trading, while shares of competitors such as Glencore and Teck Resources saw increases.
On Wednesday local time (September 24), Freeport-McMoRan provided an update on its official website regarding the mudflow incident at the Block Cave mine in the Grasberg mining area in Indonesia.
The Grasberg mine is one of the world's largest gold and copper mines and is Freeport-McMoRan's most profitable operation. The company also operates a smelter there, which was closed after a fire last year.
Metal and mining analyst Grant Sporre added that prior to the incident,the Grasberg mine accounted for approximately 3.2% of global copper ore supply this year, contributing nearly 30% of Freeport's copper production and 70% of its gold output, highlighting the scale of the disruption.
According to Freeport-McMoRan, the mudflow occurred on September 8; its Indonesian subsidiary PT Freeport Indonesia (PTFI) confirmed two worker fatalities on the 20th, and five employees remain missing, with search and rescue efforts ongoing.
Freeport stated that rescue teams are working around the clock to clear mud and debris, making steady progress in an attempt to reach the area where workers were located at the time of the incident. To prioritize the search, mining operations at the Grasberg mine have been suspended since September 8.
Analysis suggests that this incident underscores the vulnerability of the copper market to global supply shocks. If this supply disruption persists, it could continue to drive up copper prices, posing additional challenges to the smelting industry as processors are already facing severe raw material shortages.
It is worth noting that just the day before, Canadian mining company Hudbay Minerals announced the closure of a grinding plant at its Constancia mine in Peru. The Constancia mine is also one of the world's major copper mines.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, stated that the Freeport incident shows that "only a small factor is needed to tighten this market," especially when two of the world's top copper mines experience problems simultaneously, and "traders will buy first and ask questions later."
