The price of copper declined as the week drew to a close amid rising crude oil prices and a strengthening dollar. These two headwinds exerted downward pressure on most industrial metals. On Thursday alone, LME copper lost 1% to sell at about $14,270 per ton.
Comex futures shed 0.6% to reach $6.57 per pound. These declines come at a time when crude oil prices have climbed yet again and the greenback has rallied. Such an environment weighs on metals because manufacturing costs go up and trigger a drop in industrial production.
A large number of base metals have seen their prices decline this week in the wake of economic data from China indicating weaker profits from the industrial sector. China is the largest consumer of commodities on the globe, so negative news from its industrial sector has ripple effects around the world.
It doesn’t help that China has started a holiday week that will see industrial activity go quiet, further curbing commodities trading activity.
Despite recording a decline of approximately 3% this week, copper prices are still 20% higher than they were when the year started. These gains have been supported by concerns about the metal’s supply in key mining regions, and the expectation that demand from data centers and AI is only getting started and will keep going up.
Commodities markets are also sensitive to the short-term disruptions experienced at key mines in the world’s leading producer of copper, Chile. In August, the country had its lowest monthly copper output in 15 years with the output of copper declining 12.8% on an annualized basis.
Several operational challenges have plagued the country this year. These include adverse weather, dropping ore grades, accidents at mining sites, and labor disputes at several of the largest mines in Chile.
Elsewhere, a ministerial committee in Panama has recommended that negotiations be conducted with a view to resuming operations at the Cobre Panama mine owned by First Quantum Minerals. The purpose of the resumption of operations is to generate the money needed to permanently wind down the mine’s operations.
Before mining was halted back in 2023, this mine alone was producing 1.5% of all the copper entering the global market. The closure of the mine therefore exerts additional pressure on existing supplies entering global markets.
These longer-term pressures on global supply position firms like Numa Numa Resources Inc. favorably as they hold the key to shoring up global copper supplies in the coming years amid soaring demand by current and emerging demand drivers like AI.
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