Copper price rallies after Grasberg violence
Copper futures trading on the Comex market in New York rallied again on Monday spurred by troubles at the world’s second largest copper mine and large-scale speculators positioning themselves for a continued run in prices.
In huge volumes of nearly 3 billion pounds by lunchtime copper for delivery in September jumped to a high of 3.0025 a pound ($6,619 per tonne), up more than 2% from Friday’s close to the highest since November 2014. December copper topped $3.02 a pound in early trading.
Copper’s 2017 year to date gains in percentage terms now exceed 19% and the red metal has recovered 55% in value after falling to six-year lows below $2.00 a pound in January last year.
After an uneventful 2016, several outages at some of the world’s biggest mines brought supply issues back in focus this year. At one point during the first quarter some 10% of global production were off line at the same. In February-March a 43-day strike at the world’s only 1m tonne mine, BHP’s Escondida, resulted in 120,000 tonnes of lost production.
The world’s second largest copper operation, Freeport McMoRan’s Grasberg complex in Indonesia, has suffered from ongoing labour strife this year and over the weekend former workers at the mine in the remote Papua province clashed with security forces.
Reuters reports at least seven people were injured and dozens of vehicles and buildings torched. Freeport said it plans to open access roads closed over safety concerns on Monday.
Last week Phoenix-based Freeport said flash floods at Grasberg destroyed roads, bridges and water lines and one worker remains unaccounted for. The impact on operations have not been quantified but a spokesperson for the Indonesian unit said the main processing mill at the extensive complex may also be affected.
Freeport’s temporary exporting licence is coming up for renewal in October, a bargaining chip used by Jakarta as it negotiates with Freeport about divesting a majority stake in its Indonesian subsidiary.
Grasberg produced 354,000 tonnes of copper and 580,000 ounces of gold during the first half of 2017 out of total production for the company of 790,ooo tonnes. Freeport, the world number one listed copper miner, produced 1.7m tonnes of copper last year.
Shares in Freeport (NYSE:FCX) rallied on Monday adding more than 4% for a market value of $21.3 billion. The stock is up 11.7% in 2017 in line with better metals markets.
Betting on better copper prices
On the copper derivatives market hedge funds built long positions – bets on higher prices in future – to a new record high last week according to the CFTC’s weekly Commitment of Traders data. So-called managed money investors’ net longs now total over 120,000 lots, the equivalent of 3 billion pounds or 1.36m tonnes worth around $9 billion at today’s prices.
On the London Metal Exchange, hedge funds have also increased their bullish bets in recent weeks and according to LME data net longs total over 74,000 lots. LME contracts are for 25 tonnes which translates into more than 1.8m tonnes worth some $12.3 billion. LME data will be updated tomorrow.