Copper price records best month since June on mine supply snarls

Copper recorded its biggest monthly advance since June as investors weighed supply setbacks against weak Chinese manufacturing activity.

While prices eased Tuesday on the London Metal Exchange, they’re still up 3.7% for September. Copper has been supported by supply disruptions that include Freeport-McMoRan Inc.’s declaration of force majeure at the giant Grasberg mine in Indonesia.

“The longer the mine stays offline, the longer the rally will last,” Societe Generale SA analysts wrote in note, describing copper as “on fire”. Following the halt at Grasberg, and given steady increases in demand, the market could be on track for the widest annual supply deficit since 2004, they added.

About 800,000 tons of mud recently flooded underground tunnels at Grasberg, killing at least two workers, prompting Freeport to slash production guidance for this year and next.

The US miner agreed to divest a 12% share in its Indonesian unit to the government for free, CNBC Indonesia reported, citing the head of the country’s Danantara sovereign wealth fund. The divestment is part of an agreement to extend the company’s license to operate Grasberg beyond 2041.

On the macro front, meanwhile, data from China on Tuesday showed factory activity extended its decline into a sixth month, the longest slump since 2019. The official manufacturing purchasing managers’ index was at 49.8 — with figures below 50 showing a contraction. It’s the first evidence that weakness in the world’s second-biggest economy persisted through the end of the third quarter.

“Looking through the volatility of seasonal and other temporary factors, we see an economy that needs more policy support to avoid a steeper pullback,” Bloomberg Economics said.

Copper has had a volatile year, buffeted by supply outages and shifts in the Trump administration’s trade policy, both in the form of country-specific levies and sectoral tariffs aimed at some types of US copper-product imports. At the same time, there are widespread expectations for stronger demand, including for the energy transition and artificial-intelligence data centers.

Copper lost 1.4% to settle at $10,268.50 a ton at 5:50 p.m. local time on the LME. Prices are up 17% this year after peaking just above $11,000 in May 2024. Other metals were mixed with zinc up 0.7% and nickel down 0.5%.

(By Annie Lee)