Copper prices: AI demand collides with natural disaster
Deadly storms that have disrupted copper mines in Chile could amplify market strains, strategists say, as the U.S. and China battle for supply of the critical industrial metal, in turn pushing prices higher.
Although the immediate outages appear limited, mining disruption in Chile — which accounts for more than a fifth of global copper production — has landed in a market already distorted by U.S. tariff expectations, tighter scrap availability in China and surging demand for refined metal used in power grids and AI infrastructure, strategists say.
Heavy snow, flash flooding and high winds have swept across the South American nations over the past week, killing 13 people and disrupting operations run by major producers including Anglo American, Antofagasta, Lundin Mining and state-owned Codelco.
Antofagasta, the London-listed Chilean major, has halted mining and processing at its Los Pelambres operation, while Toronto-headquartered global miner Barrick evacuated employees because of the extreme weather.
Copper.
Lundin Mining said Monday that operations at its Caserones mine in Chile’s northern Atacama region could take two to three weeks to restart. Power lines serving the mine were damaged by heavy snowfall, forcing the Vancouver-based company to suspend operations on July 18.
Rainfall also disrupted Lundin’s Candelaria mine, although the site continued operating using existing ore stockpiles, later returning to full capacity.
A global supply squeeze
Copper prices have surged in recent years, hitting an all-time high of $6.70 per pound, or $13,643 per metric ton, on June 2 as concerns over a global supply squeeze intensified.
Strategists warn that any prolonged hit to Chilean output resulting from the winter storms could add further upward pressure on prices — raising the cost of building AI data centers and manufacturing smartphones, electric vehicles, household appliances and industrial machinery — all of which rely heavily on copper.
Ewa Manthey, commodities strategist at ING, said the storms alone were unlikely to upend the copper market. However, the disruption reinforces the broader theme driving prices: supply is increasingly struggling to keep pace with demand.
“With the market already facing supply disruptions, tariff uncertainty and tighter concentrate availability, any prolonged weather-related outages in Chile could provide additional support for prices,” Manthey told CNBC via email.
Natalie Scott-Gray, senior metals demand strategist at StoneX, said uncertainty over potential U.S. Section 232 tariffs and China’s crackdown on the availability of scrap copper have tightened global supplies this year.
She told CNBC’s “Morning Call” that Chile — the world’s biggest single copper producer — recently downgraded its output by 2% this year to 5.3 million tonnes.
“It just amplifies mining supply risks for Chile, in which we expect a second year of declining output,” she later said via email.
Scott-Gray described the impact on major producers from the storms as “temporary and limited,” highlighting contingency plans designed to contain the damage, with smaller miners — which tend to have less operational flexibility — more likely to be affected.
But any further setbacks to mine supply could leave buyers competing for an even smaller pool of available copper, boosting prices further.
Another record high?
Duncan Wanblad, CEO of Anglo American, said the company is “very, very bullish” on copper’s fundamentals.
The firm reported a 35% jump in its earnings before interest, taxes, depreciation, and amortization to $4 billion in its first half trading statement Thursday, aided by a “favorable” copper price. Speaking with CNBC’s “Squawk Box Europe”, Wanblad said the London-listed miner has “reshaped its business” around the metal.
“We are a copper-led mining company… underpinned by some of the world’s best mining assets,” he added.
Commodity strategists earlier this month flagged the outsized impact on commodity markets — including copper — from the stronger-than-usual El Niño this year, with both floods and drought potentially affecting mining of the base metal.
“Storms are by their nature short-lived unless they cause major infrastructure damage and whilst droughts can have longer-lasting effects on water and power availability, particularly for hydro power, most mines have contingency plans to mitigate at least some of these effects,” said George Cheveley, natural resources portfolio manager at Ninety One Asset Management. He added that speculation on U.S. tariff changes remains a main driver of price moves rather than physical demand.
Nearly two-thirds of visible global inventories — 64% — are now held in the U.S., while tariff fears, strategic stockpiling and import arbitrage into the U.S. and China have pulled supplies away from other markets.
Lundin.
Scott-Gray said that inventories on the London Metal Exchange and Shanghai Futures Exchange are below their five-year averages, signaling “real world physical tightness.”
Now, with three-month copper on the LME trading at around $13,750, “it is not out of the question that we will see another record high for copper being posted this year, especially with speculative net longs now prevailing across all major exchanges,” Scott-Gray added.
She expects Chinese buying to ease in August, reducing the flow of metal into the country and slowing withdrawals from LME inventories. “The largest unknown in the market remains what the U.S. administration will do over Section 232 tariffs, and the outlook in each case,” she added.
