Copper capped by hidden supply surge – by Andy Home (Reuters U.S. – March 29, 2017)

LONDON – Has the copper price rally which started so spectacularly late last year run out of momentum? The London Metal Exchange (LME) price, basis three-month delivery, hit a nine-month high of $6,204 per tonne last month, since when it has churned in a broadly directionless range below the $6,000 level.

This is all the more surprising given the severity of the supply-side hits that have been grabbing the headlines. The strike at the world’s largest mine, Escondida in Chile, has ended. But at 43 days it was longer than expected and, factoring in a gradual ramp-up to full production, is going to translate into some 230,000-240,000 tonnes of lost output, analysts reckon.

The world’s second largest mine, Grasberg in Indonesia, is operating at only 40 percent of capacity due to an increasingly acrimonious dispute between operator Freeport McMoRan and the Indonesian government.

Cerro Verde, another huge copper mine in Peru also operated by Freeport, is also seeing protracted strike action, albeit with uncertain impact on output levels. And yet the copper price seems uninterested.

This is, simply put, because there is a lot of the stuff around. Global exchange stocks of copper have surged by around 167,000 tonnes so far this month to 750,000 tonnes, the highest level since mid-2013.

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