How halting Cobre Panamá affected global copper prices

The global metals market reacted quickly to the closure of Panama’s Cobre Panamá copper mine in December, but the effect was relatively muted.

The supreme court ruled on November 28 that the new contract between the government and mine owner First Quantum Minerals was unconstitutional, ruling that it would have to stop operations.

On December 1, the global copper price reached a three-month high, as reported by Bloomberg. 

Apart from the closure of Cobre Panamá, prices were also affected by expectations of imminent monetary easing by the US Fed and rising demand on the back of China’s economic stimulus, Bloomberg said.

SHUTDOWN EFFECTS

The Cobre Panamá open pit mine produced 330,863t of copper in 2023, down 5.6% from 2022, as operations were first interrupted by blockades and ceased after the court ruling.

Bloomberg assigns the mine a 1.5% contribution to global copper supply. With that share and according to the equilibrium model, the price should have risen by 1.5% – assuming stable demand – the head of strategy at Chilean brokerage Mesadinero, Andrés Rioseco, told BNamericas.

But on the London Metal Exchange, the price closed at US$8,389/t (US$3.80/lb) on February 29, compared with US$8,456/t on December 1, 2023.

“The problem here is that this was discounted by the market a long time ago, so the impact had already been incorporated into the prices and now the market is discounting other factors in the future,” Rioseco said.

He added that future asset prices will always discount such developments, so the past has no weight in upcoming price calculations.

In mid-January, Rioseco predicted an average copper price of US$3.57/lb in 2024, lower than the US$3.85/lb projected by Chilean copper commission Cochilco, mainly due to the fragile US economy.

Rioseco also expects a market deficit this year, due to the closure of Cobre Panamá and lower production by Anglo American at around 600,000t. “If the reopening of Cobre Panamá is achieved after the Panamanian elections in May, the deficit would be smaller,” Rioseco said at the time.

However, he also highlighted that output of Chile’s state miner Codelco is at a 25-year low and is well below the plan implemented around five years ago. Codelco’s management, however, expects higher production than anticipated to make up for any shortfalls.

Chile is the world's top copper producer, reporting 5.25Mt last year.