Copper on the rise

If we wanted to explain in a single sentence how global supply chains work, we could rely on the theory developed by mathematician Edward Norton Lorenz, the so-called ‘butterfly effect’, according to which “the flapping of a butterfly’s wings can cause a hurricane on the other side of the world”.

The intricate trade links that exist between the various countries of the world mean that a small break at one point in the chain can cause damage even thousands of kilometers away.

This is what happened a few days ago in Indonesia where Freeport-McMoRan announced a state of force majeure at its Grasberg mine, one of the largest copper and gold reserves in the world, following a massive mudslide that forced the temporary interruption of mining activities. The incident has put pressure on the global copper market, which is already facing supply disruptions and sharply rising demand due to the transition to clean energy and the boom in artificial intelligence. This tragic event, which has also caused casualties among mine workers, explains the upward trend of recent weeks and forces, given the significant production losses expected for 2025-2026, a budget revision towards the deficit.

In fact, the Grasberg accident is part of an already compromised picture regarding copper production; another major disruption occurred due to the accident at the El Teniente mine in Chile, the world’s leading copper producer. For the Chilean state-owned group Codelco, this shock caused a 25% decrease in copper production in August. The mine collapse caused 6 fatalities and a production drop of approximately 33,000 metric tons.

Regarding the Grasberg incident, Albert Mackenzie, a copper analyst at Benchmark Mineral Intelligence, said, “The scale of this disruption is very large.” Benchmark’s analysis suggests that the disruption will result in a loss of 591,000 tonnes of copper production between September 2025 and the end of 2026.
This represents 2.6% of global mining production calculated for 2024, equivalent to about 23 million tonnes according to analysts.

Grasberg’s supply losses mean the global copper market will face a significantly larger deficit of around 400,000 tonnes in 2025, according to Benchmark Minerals.
The outage changed Goldman Sachs’s projected 2025 copper market balance from a surplus of 105,000 tonnes to a deficit of 55,500 tonnes. A small surplus is expected for 2026.
With losses in Grasberg production between September and December, the copper market faces its biggest deficit since 2004, Societe Generale said on Monday.

What awaits us in the coming months? Will the price of copper rise?

This will depend on the trend in the world economy, particularly in China, the main consumer currently absorbing 60% of global demand, in addition to the international dollar exchange rate, the uncertainty generated by the fiscal situation in the United States, and the Federal Reserve’s upcoming interest rate moves in the large northern country.

First, it is useful to monitor the dollar’s trend internationally, because any depreciation would push up the price of copper and, conversely, decrease its value. Particular attention must also be paid to the evolution of the government shutdown in the United States and the statements of Federal Reserve Chairman Jerome Powell against the backdrop of slowing inflation and declining employment.