Hong Kong Stock Concept Tracking | The world's second-largest copper mine has an accident, tightening supply drives copper prices higher (with concept stocks)
The world's second-largest copper mine, Grasberg, has experienced an accident, leading to increased supply tensions. Freeport-McMoRan Inc. announced that it has encountered force majeure and may be unable to fulfill supply contracts, while also lowering its copper and gold production forecasts. This news has driven copper prices on the London Metal Exchange to soar to USD 10,300 per ton. Analysts point out that the tight copper supply will lead to the formation of a new pricing mechanism. The copper mining sector in the U.S. stock market has generally risen, and related Hong Kong stocks such as CMOC and ZIJIN MINING have also been affected
The global copper market faces further challenges: a massive mudslide has resulted in the deaths of two employees and five missing at the Grasberg mine in Indonesia, with Freeport-McMoRan Inc. announcing that it has encountered force majeure related to the incident.
Driven by the energy transition and the surge in artificial intelligence, the demand for this essential metal in electronic products has skyrocketed.
However, copper mines from South America to Central Africa have faced a series of accidents and disruptions, leading to supply tightness.
According to Zhitong Finance APP, Grasberg is the second-largest copper mine in the world, accounting for 3% of global output.
Freeport, headquartered in Arizona, USA, warned on Wednesday that it may be unable to fulfill supply contracts for the mine and also lowered its copper and gold production forecasts for the current season. This move surprised many market participants and pushed copper prices on the London Metal Exchange to soar above $10,300 per ton, nearing the historical high of $11,104.50 set in May 2024.
"This is very significant," said BMO Capital Markets analyst Helen Amos. "This occurs at a time when copper supply is already quite tight. Under otherwise similar conditions, this will lead us to face a new price mechanism that is higher than ever before." Freeport's stock price fell nearly 17% on Wednesday, marking its largest drop in five years.
UBS released a research report stating that due to limited growth in copper supply, coupled with pressure on refined output and a recovery in traditional demand drivers, the fundamentals for 2026 and 2027 will continue to support prices. The bank raised its copper price forecasts for this year and next by 3% each, from $4.24 and $4.68 per pound to $4.37 and $4.80.
On Wednesday, U.S. copper mining stocks collectively rose, with Ero Copper (ERO.US) and Southern Copper (SCCO.US) up over 8%, Taseko Mines (TGB.US) nearly 8%, and Hudbay Minerals (HBM.US) up over 6%.
Related industries in the copper mining sector in Hong Kong:
CMOC (03993), ZIJIN MINING (02899), China Nonferrous Mining (01258), Minmetals Resources (01208), Jiangxi Copper (00358), China Railway (00390), etc
