Last week, the price of copper increased, with copper for delivery in September increasing by 2% to $9,084 per ton. This comes after a six-month low that saw copper drop to $8,715 per ton on the Comex market in New York. Analysts believe that the metal’s prices are on course for a decline based on several factors, including the rising coronavirus cases, the Federal Reserve withdrawing stimulus measures and worries about decreasing demand in China, which is the biggest consumer of the red metal.
Edward Meir, an analyst at ED&F Man Capital Markets, stated that the macro numbers out of China had been slow for a while, adding that the spreading delta virus strain and the stronger dollar were other factors that could influence the metal’s price.
Expectations that the Fed will begin to tighten monetary policy has boosted the U.S. dollar. Usually, an increase in the value of the dollar makes metals that are dollar-denominated more expensive for other currency holders, weighing on demand.
Concerns about demand across the globe and economic activity are growing, alongside an increase in the coronavirus cases globally, which has been brought about by the delta variant. Prices of the metal are falling just as the quality of copper ore deteriorates and miners in Chile, the country that produces the highest output of copper, call for bigger bonuses.
At the start of the month, workers at the Caserones mine, which is owned by JX Nippon Mining & Metals, began striking after talks over a collective labor contract collapsed. The Caserones mine produced more than 126,000 tons of copper in 2020. Workers at the Escondida mine, which is owned by BHP, also agreed to a bonus package to help prevent a strike at the largest copper mine in the world. The mine produces about 5% of total copper mined in the world. The agreement would also avert stoppage and help ease tensions over tightening supplies at a time when government stimulus packages are driving the demand for industrial metals. Another copper mine in Chile, the Andina mine, which is owned by Codelco, is also allowing workers to vote on a new proposal.
These labor talks are averting stoppages in a country that produces more than 25% of the global output of copper. Chile has a history of stoppages, with data showing that in 2017, strikes led to a more than 40-day stoppage. The mines that may be affected by this tough environment include Sierra Gorda, which is owned by KGHM Polska Miedz SA, along with BHP Group’s Cerro Colorado and the Hales and El Salvador mines, which are also owned by Codelco.
The rally observed in the price of copper is likely to boost the earnings of base metals extractors such as First Energy Metals Ltd. (CSE: FE) (OTCQB: FEMFF) which have uninterrupted operations.
NOTE TO INVESTORS: The latest news and updates relating to First Energy Metals Ltd. (CSE: FE) (OTCQB: FEMFF) are available in the company’s newsroom at https://ibn.fm/FEMFF
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