Copper Mine Supply Declines for First Time in Seven Years
Copper mine supply has entered uncharted territory after posting its first decline in seven years. The International Copper Study Group (ICSG) reported a 1.1% year-over-year drop in global copper mine production for the first half of this year, forcing Morgan Stanley to revise its full-year supply outlook from 'modest growth' to 'roughly flat or slightly lower.' This marks the first annual decline since 2017.
The disappointing production figures have shaken market consensus that copper supply would at least grow modestly this year. Chile's state-owned Codelco, the world's largest copper producer, and U.S.-based Freeport-McMoRan both recorded double-digit percentage declines in first-half output. Chile's second-quarter copper production fell to its lowest level for the period in at least 19 years.
Major mining companies are facing multiple bottlenecks that prevent high-price signals from translating into actual output, including declining ore grades and frequent safety incidents. Evy Hambro, Global Head of Thematic and Sector Investing at BlackRock, noted that miners' inability to boost production is the fundamental reason the copper market is 'very, very tight.'