Metal prices retreated as the week ended amid an escalation in the hostilities between Iran and the U.S., while a huge storm bearing down on Chile rattled copper markets. However, damage to copper prices was tamped down due to supply concerns as adverse weather in Chile triggered concerns about disruptions to mine output.
The selloff in industrial and precious metals started when news filtered through that for the first time since America resumed its blockade of Iranian ports, a tanker was struck by the U.S. Bond yields and the USD trended higher as concerns grew that the Fed would consider raising lending rates in a bid to control inflation resulting from higher oil prices.
Silver slid by nearly 4%, gold retreated by 2.1%, and copper lost 1.1%. The day ended with COMEX copper going for $13,980 per ton. On the LME, copper was trading at $13,585.
Copper’s decline would have been greater, but a brewing storm that threatens to disrupt infrastructure and mining activities tamped down concerns about the conflict in the Middle East. Instead, attention was directed at the potential supply disruptions after major copper producers in Chile signaled that their mining sites are likely to face disruptions due to the storm bearing down on the country.
The Chilean government indicated that they were working with mining companies and government agencies to coordinate responses to the winter storm but admitted that the Category 5 atmospheric river is likely to disrupt power supplies despite every effort made to mitigate the damage. Category 5 is the most severe category of winter storms and there is little authorities can do to avert its damaging effects.
Major copper suppliers from Chile flagged declining output and stoked supply fears. Antofagasta said its production during the first six months of this year had dropped by nearly 10%. BHP cautioned that mine output from its Chilean operations is forecast to decline in 2027, while the IEA indicated that shortages of sulfuric acid had significantly worsened the near-term output projections for copper supply.
Stocks of companies that mine copper were hit harder than the metal itself. Shares of Freeport-McMoRan dropped by 4%, Ivanhoe Mines slipped 4.9%, Antofagasta dropped 4.1%, while BHP retreated by 2.3%. It remains to be seen how these current market conditions will impact stocks of mineral exploration companies like Collective Mining Ltd. (NYSE American: CNL) (TSX: CNL) in the near- to medium-term.
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