Copper Bucks Souring Economic Sentiment With Gains on Supply Woe

(Bloomberg) -- Copper prices advanced as supply concerns mounted with the giant mines of South America sending mixed signals on the outlook for production.

In Chile, the biggest copper-producing nation, unions called for a two-week shutdown at the Chuquicamata mine after the death of a second worker. In Peru, the second-largest producer, the industry is nearing full output again after halting for two months when the pandemic hit.

Risks to copper supply are offsetting worries about the demand outlook as major economies battle a new wave of coronavirus infections. Many mines are still operating with reduced staff amid the pandemic, inventories are falling and scrap is scarce. UBS Group AG now sees demand outstripping production this year amid supply disruptions.

“Investors remain anxious about supply risks from Latin America,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “Chilean supply has held up well but labor concerns can flare quickly.”

Copper for three-month delivery rose 0.5% to settle at $5,893 a metric ton at 5:51 p.m. on the London Metal Exchange. The commodity is on course for its sixth straight weekly gain and its best quarter since 2010.

UBS analysts now project a 300,000-ton deficit this year, compared with an earlier forecast for a surplus of 900,000 tons. Macquarie Group Ltd. commodities strategist Vivienne Lloyd said in a note that “copper’s Covid-19 mine disruption tally is now closing in on half a million tonnes -- five times the 100kt we estimated back in March.”

Other industrial metals on the LME were mixed, with aluminum falling and zinc advancing.

The Covid-19 pandemic is tearing through the U.S. heartland, setting records for hospitalizations and forcing businesses to rethink their plans to reopen as new modeling predicts the virus will kill 180,000 Americans by October. A report Thursday showed the number of Americans seeking unemployment benefits was higher than forecast for a second straight week, adding to signs that the recovery is cooling.

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