Over the past two months, the Copper Monthly Metals Index dropped 4.5%. While a strike at the Escondida mine managed to keep the price of the red metal afloat in the first weeks of this month, the red metal’s price continues to decrease, dipping 5.7% below its July price. The mine, located in Chile and owned by BHP, accounts for about 5% of copper globally. Protests over pay led to a strike, which ended after the union signed a new three-year deal.
Community backlash has also seen the Cobre Panama copper mine owned by First Quantum halt its operations. Additionally, the Las Bambas mine in Peru has been dealing with blockades as communities pressure mining companies to increase their support.
Disturbances in the mining sector have become more common in the last few years. With a deficit in copper supply forecasted to occur in the future, the need to have consistent copper supply is paramount.
Many believe that if copper consumption in China had been stronger this past quarter, the metal’s prices would have found a way to avoid their downtrend. Up until the latter half of 2022, Chinese HRC and LME copper prices had a 91% correlation. Between July 2022 to now, this correlation has shifted to -46%.
The country’s property sector has been deflating for years now, with stimulus measures announced by the government doing little to stop falling home prices. This situation is worsened by the aging population in China.
To help with this, the government announced stimulus for the country’s renewable sectors, with the production of solar and electric cars compensating for the reduced copper demand from the property sector. Currently, there are no guarantees that the demand for copper in China will progress, with experts positing that solar and EV overcapacity could derail the country’s plan to use this sector to get the nation out of its slump.
China has yet to announce more significant stimulus efforts, despite many expecting that the conclusion of its Third Plenum would prompt the government to introduce support measures. Instead, the government announced rate cuts, which some believe will allow the country to spend more funds without greatly deflating the yuan.
While there is no guarantee that stimulus will effectively boost consumer demand, expectations still exist. Currently, the east Asian nation continues to depend on the export market to maintain growth.
Experts believe, however, that as more countries impose restrictions on products and materials from China, the country’s demand for metals such as copper will face problems, especially if consumer demand doesn’t improve.
While the immediate future of the copper market remains uncertain, copper-exploration companies such as Torr Metals Inc. (TSX.V: TMET) can take comfort in the knowledge that in the long run, the demand for copper is projected to keep growing due to the ongoing clean-energy transition and the needs of other industries that require increasing amounts of the metal.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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