Copper, which used to have sufficient supply, suddenly started to become scarce?

In just two weeks, the expectation of copper oversupply in 2024 has suddenly almost disappeared.

With a series of new large-scale mining projects launched around the world, the next few years were supposed to be a period of abundant copper resources, and the expectation in most industries was that there would be a comfortable supply surplus before the copper market tightened again later in this decade.

But now the situation is that the mining industry is facing comprehensive challenges such as political disputes, social protests, new business development, and increased mining difficulties, making the copper supply very fragile.

After weeks of protests and political wrangling, the Panamanian government officially ordered Canadian mining giant First Quantum Minerals to stop its operations in all copper mines in the country last week. Cobre Panama, one of the world's largest copper mines under the company, can produce about 400,000 tons of copper annually, accounting for more than 1% of global copper production. The Panamanian Supreme Court ruled last Tuesday that the copper mining contract renewed by First Quantum and the Panamanian government was unconstitutional.

While the market was still digesting the news of the closure of Cobre Panama, mining giant Anglo American threw a heavyweight bombshell at the market on Friday, announcing a reduction in production of its flagship copper business in South America.

Anglo American has lowered its copper production target for next year by about 200,000 tons, essentially eliminating the production equivalent of a large copper mine from global supply, and production is expected to further decline by 2025.

Although the problems with South African platinum mines and iron ore mines are well known, the reduction in copper production caught investors off guard, causing the company's stock price to plummet by 23.4% in just five trading days.

Analysts said that the sudden cancellation of expected supply of about 600,000 tons will quickly turn the copper market from abundant supply to tight balance. As a necessary commodity for the green economy, the supply and demand of copper also affect the global green transformation, sounding the alarm for the social responsibility of mining companies.

In addition, the active copper inventory on the London Metal Exchange has soared to a two-year high since mid-year, but has fallen for three consecutive weeks. Although concerns still exist, the market's response to the interruption of copper supply has been mild so far.

It is worth noting that in the months before this, the market mostly predicted an oversupply of copper next year.

In early October, the International Copper Study Group stated that the expected oversupply next year would be 467,000 tons, the largest oversupply forecast by the organization since 2014.

BMO Capital Markets originally predicted a large surplus of refined copper next year, but now predicts a slight deficit. Goldman Sachs, which has always been bullish on copper, previously predicted a shortage of refined copper in 2024 and now expects the gap to widen to over 500,000 tons. Jefferies still predicts a severe shortage of copper next year. Goldman Sachs analyst team led by Nicholas Snowdon said:

Supply cuts have strengthened our view that the copper market is entering a more pronounced period of tightness.

Jefferies stated:

Disruptions have significantly increased, and the possibility of supply shortages in the market is growing. We may be at the beginning of the next copper cycle.