Copper set for best month in year as supply snarls rattle market

SEATTLE (Scrap Monster): Copper headed for the biggest monthly advance in a year, as investors weighed supply setbacks against weak data from China’s manufacturing sector. 

While prices eased on the London Metal Exchange on Tuesday (Sept 30), they’re still up 4.5% in September and near a 16-month high. Copper has been supported by supply disruptions, with the latest being 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 said in a note, describing copper as “on fire”. Following the halt at Grasberg and given steady increases in demand, the market could be on track this year for the largest annual deficit since 2004, they said.

About 800,000 tonnes of mud recently flooded underground tunnels at Grasberg, killing at least two workers, with Freeport slashing its 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 licence to operate Grasberg past 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 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 centres.

Copper lost 0.6% to US$10,347 (RM43,566.04) a tonne by 12.53pm local time on the LME (7.53pm Malaysia). Prices are up 18% this year and peaked just above US$11,000 in May 2024. Aluminium, zinc and nickel were little changed on Tuesday.

 Courtesy: www.theedgemalaysia.com