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Copper Rallies on Chilean Unrest, Freeport’s Lower Q3 Output

October 23, 2019 at 15:30 by Andrew Moran

Copper futures are rallying midweek as unrest in Chile intensifies, threatening production of the industrial metal. Copper prices are also trading higher on Freeport McMoran’s third-quarter report that found a decline in output at its Indonesian and Peruvian mines. Investor interest in the red metal was raised on a new forecast that suggests next year will be big for copper.

December copper futures rose $0.0225, or 0.85%, to $2.6555 per pound at 15:13 GMT on Wednesday on the Comex division of the New York Mercantile Exchange. Despite being relatively flat on the year, prices have climbed nearly 2% in October and topped a one-month high.

Traders are projecting that supply shortages will cripple the global copper industry in the short-term, resulting from the protests paralyzing Chile. Thousands of citizens took to the streets of Santiago as they demonstrated against a higher cost of living. To show solidarity with the protestors, the union of workers at BHP’s Escondida, the world’s largest copper mine, will hold a one-day strike.

On Wednesday, Freeport McMoran, the second-largest copper producer on the planet, stated in its Q3 earnings report that production declined 14% and sales to South American markets were lower. Freeport posted a net loss of $131 million, compared to a $556 million profit at the same time last year.

But it is not just Freeport recording diminishing production. According to the International Copper Study Group (ICSG), mined copper output declined by 1.4% in the first half of 2019 across the globe.

Meanwhile, writing in its outlook for next year, Capital Economics projected that copper will be a “star performer” in 2020. Capital Economics chief commodities economist Caroline Bain wrote:

We forecast that the price of copper will rally. Net-demand proxy suggests that growth in physical copper demand, though subdued, is still outpacing supply … Mine supply growth looks set to contract in 2019 and will probably remain weak in 2020 … We also expect demand to pick up gradually next year.

Gold’s rally will subside next year, though prices are expected to finish above $1,500 to close out 2019, the outlook said.

In other metal markets, December gold futures tacked on $9.20, or 0.62%, to $1,496.70 per ounce. November silver futures rose $0.065, or 0.37%, to $17.565 an ounce. November platinum futures surged $25.30, or 2.82%, to $921.30 per ounce. December palladium futures slipped $7.10, or 0.41%, to $1,721.40 an ounce.

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