A number of happenings in the copper market conspired to elevate the spot price beyond $4.60 a pound on Thursday, confirming Ahead of the Herd’s suspicions that a new wave of resource nationalism in some of the largest copper-producing nations is washing over the sector.
Resource nationalism is the tendency of governments to assert control, for strategic and economic reasons, over natural resources located on their territories. It has been identified as one of the key risks for investors in the natural resources space.
With the copper price soaring on tight supply and heavy demand, as the world’s biggest economies revive following a year of coronavirus-related restrictions, the temptation for producer nations to cash in on more valuable copper reserves to pay for social programs is proving hard to resist.
Chile and Peru, the number one and two producers, are both seeking to raise the royalty tax on copper miners, while in the DRC, Africa’s top copper-mining country, the government has just slapped a ban on the export of copper and cobalt concentrates — an action almost identical to what has happened in Indonesia with nickel.
Adding to these events, workers at BHP’s Spence and Escondida mines in Chile downed tools, Thursday, fueling concerns about the long-term supply of the industrial metal, that has become essential not only for its traditional uses in construction, transportation and telecommunications, but the shift from fossil fuels to electrification and decarbonization.
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