According to Bloomberg, copper prices surged on Wednesday after US mining giant Freeport-McMoRan (FCX-US) announced it had declared force majeure on contracted supplies at its Grasberg copper mine in Indonesia due to an accident. The mine, the world's second-largest, highlights the market's vulnerability to supply disruptions.

Freeport stated in a statement that operations were halted after an accident on the 8th of this month caused a mudflow of approximately 800,000 metric tons into an underground tunnel. Two workers have been confirmed dead, and five remain missing. The company is conducting an ongoing search and rescue operation, deploying teams around the clock to clear mud and debris and reach the missing workers. Freeport acknowledged that the accident was unprecedented in its history.

Due to the accident, Freeport lowered its third-quarter copper and gold sales forecasts, projecting declines of approximately 4% and 6%, respectively, compared to its July estimates. The company stated that the Grasberg mine contributes nearly 30% of its copper production and 70% of its gold production, accounting for approximately 3.2% of global copper mine supply this year. A prolonged shutdown would further exacerbate refinery feedstock shortages. The force majeure declaration also means the company is temporarily exempted from supply obligations due to unforeseen circumstances.

Three-month copper prices on the London Metal Exchange surged as much as 3.7% to $10,341 per metric ton during intraday trading, marking their largest single-day gain since April 10. Market experts point out that when the world's two largest copper mines are simultaneously experiencing disruptions, any supply risk will quickly drive up prices. Ole Hansen, head of commodity strategy at Saxo Bank, described traders as "buying first and then thinking later," highlighting market tensions.

Freeport's shares plummeted as much as 11% in New York on Wednesday, but other peers benefited from rising prices and saw their shares generally rise. Glencore's shares rose more than 3% in London, Antofagasta surged nearly 10%, and Teck Resources (TECK-US) and Southern Copper (SCCO-US) surged 6% and 10%, respectively, in New York.

This incident, which followed the suspension of operations at Hudbay Minerals' Constancia mine in Peru due to political protests, highlights a series of setbacks facing the global copper mining industry. Analysts believe that if the Grasberg production outage continues, benchmark copper prices could reach new highs, further pressuring the global supply chain and smelting industry.

Source:https://news.cnyes.com/news/id/6166937