Copper Bucks Souring Economic Sentiment With Gains on Supply Woe
(Bloomberg) - Copper prices rose as concerns over the supply of South America's huge mines increased and sent mixed signals about the prospects for production.
In Chile, the largest copper-producing nation, unions have called for the Chuquicamata mine to be shut down for two weeks after the death of a second worker. In Peru, the second largest producer, industry is back to full production after stopping two months after the pandemic broke out.
The risks to copper supply offset concerns about the prospects for demand as major economies are fighting a new wave of coronavirus infections. Many mines are still working with reduced personnel during the pandemic, inventories are falling and scrap is scarce. UBS Group AG sees demand this year that exceeds production due to supply disruptions.
"Investors remain concerned about the supply risks from Latin America," said Tai Wong, head of metal derivatives trading at BMO Capital Markets. "The Chilean supply has held up well, but concerns about the workforce can flare up quickly."
Copper for a three-month delivery rose 0.5% to $ 5,893 a ton at 5:51 p.m. on the London Metal Exchange. The commodity is on the way to its sixth consecutive weekly profit and its best quarter since 2010.
UBS analysts now forecast a deficit of 300,000 tons this year, compared to an earlier forecast for a surplus of 900,000 tons. Macquarie Group Ltd. commodity strategist Vivienne Lloyd said in a note that "the Covid-19 copper mine fault is now at half a million tons - five times the 100 kt that we estimated in March."
Other industrial metals on the LME were mixed, with aluminum falling and zinc advancing.
The Covid-19 pandemic sweeps across the US heartland, setting hospitalization records and forcing companies to rethink plans to reopen as new models predict the virus will kill 180,000 Americans by October. A Thursday report showed that the number of Americans applying for unemployment benefits was higher than forecast for a second week in a row, which contributed to signs of a slowdown in the recovery.
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