Copper producers issue fresh warnings about price volatility

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Copper producers have issued fresh warnings about price volatility for the red metal — vital for the clean energy transition — as the industry meets for its most important annual gathering, the London Metal Exchange week.

Iván Arriagada, chief executive of Chilean copper producer Antofagasta, said there was a “disconnect” between government policies that are not issuing permits for new mines quickly enough, and demand for the metal.

Over the next decade the world will need to add the equivalent of Chile’s entire copper production, he said, otherwise there is a risk the energy transition “will be delayed”.

The expected shortage of the metal, which is used in electricity grids, wiring and electric cars, would mean price swings would be “sharp from time to time”, he said, speaking at the FT Mining Summit last week. 

“The copper market has traditionally been very sensitive to the short-term contingent macro element,” he added.

His comments were made just ahead of LME Week, which begins today, where producers, traders and users meet to agree contracts for the following year.

“Volatility is going to be a persistent feature,” added Nicholas Snowdon, head of metals and mining research at Mercuria, a trading house, referring to copper prices. “It’s going to be a see-saw.”

Last week copper had its biggest weekly gain in four months, up 6 per cent as it broke through $10,000 per tonne, after China announced stimulus measures expected to shore up demand in the world’s largest consumer of the metal. 

Prices had surged to a record high of more than $11,100 in May, driven by constrained supply and demand for renewable energy, before sinking over the summer as some analysts questioned miners’ repeated predictions of shortages.

Jonathan Price, chief executive of Teck Resources, a Canadian copper and zinc producer, said the latest additional stimulus measures from China should “spur some new demand”.

However, even the rising copper prices may not be “sufficient to incentivise the building of some of the megaprojects that the world is going to need”, he added. 

The establishment of new metal mines typically takes years, sometimes more than a decade.

This has fuelled persistent concerns of a looming shortage for metals including copper and lithium, which are used in key areas of production such as infrastructure and car batteries.

Other executives at the FT Mining Summit emphasised the central role that copper would play in the coming years and the need to boost supply.

Anglo American chief executive Duncan Wanblad said the world was “almost completely united on how important copper is”. For the company, which is restructuring its business, “the priority has to be copper in the short run”. 

Peter Toth, chief development officer at gold miner Newmont, added: “At an industry or societal level, somebody has to build more copper mines.”