Copper prices touched a five-month peak on Friday on growing fears that output will be disrupted in top producer Chile by worsening COVID-19 infections at mines.
Chile’s Codelco, the world’s biggest copper miner, suspended refinery and foundry operations at its Chuquicamata division to prevent further spread of the new coronavirus.
“Chile has been one of the fortunate producers. It hasn’t suffered too much from the outbreak and government lockdowns didn’t really have much of an impact on production in the first four months of the year,” said Kieran Clancy, assistant commodities economist at Capital Economics.
“That being said, there is mounting evidence that they’re starting to struggle with pockets of outbreaks at mines and the pushback from trade unions for safer working practices.”
Three-month copper on the London Metal Exchange had climbed 1 per cent to $US5,952 a tonne by 1600 GMT, the strongest since January 24. It was on track for a 1.8 per cent weekly gain, its sixth straight weekly rise.
Capital Economics has recently upgraded its copper forecast and is now expecting the LME price to end the year at $US6,200 a tonne, Clancy said.
The Chuquicamata closure will impact supplies of concentrate more than refined metal, Susan Bates at Morgan Stanley said in a note. “We note that the smelter was suspended through much of 2019 with limited market impact.”
Chile mine output is forecast to fall by 250,000 tonnes to 5.56 million tonnes this year, she added.
The spread between LME cash copper and the three month contract flipped to a premium for the first time since April last year, indicating worries about short-term supply. It was at a premium of $US1.15 a tonne on Friday compared to a discount of $US30 on June 16.
LME aluminium stocks extended their rise, adding 14,275 tonnes to 1,652,025, the highest since April 2017, having shot up 70 per cent since mid-March, LME data showed.
LME aluminium shrugged off the signs of surpluses, jumping 2 per cent to $US1,601 a tonne.
LME zinc shed 0.2 per cent to $US2,045 a tonne, nickel gained 2 per cent to $US12,690, lead edged up 0.03 per cent to $US1,786.50 and tin rose 1.6 per cent to $US16,850.