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Copper Supply Chain Responding to Coronavirus Outbreak

Metal News - Published on Thu, 26 Mar 2020

Image Source: Copper Coronavirus Outbreak
Woodmac in a latest report said that the collapse of the copper price and the containment measures taken for the coronavirus COVID-19 pandemic, are posing a significant risk to global mine supply and project development. Day-by-day, mining companies are announcing revised plans to comply with new restrictions. Most producing countries are now impacted, and the two largest, Chile and Peru, are now in a state of emergency. For now, temporary closures will be absorbed by our mine disruption allowance In a scenario where there are wholesale closures of mines in Peru and Chile for 15 days, we would see 1.5% wiped from global annual supply. It would take 45 days to reach our full year mine disruption allowance. At this stage, we are not assuming mine supply from these countries will stop in its entirety. However, we believe there is a significant risk that disruptions will escalate, and breach 5% this year. It said “There is a significant risk that disruptions will escalate, and breach 5% this year. Low prices could hamper mine restarts and new projects The copper price is currently trading below the 90th centile of the industry cost curve (223 c/lb). Temporary closures and construction deferrals have accelerated due to virus containment. However, a sustained period of lower prices could make these more permanent.”

In recent days, the reach of coronavirus has rapidly expanded from key regions of copper demand - China and Europe, to key regions of supply - the Americas. Peru has enforced widespread quarantine, and some mines are now thought to be on temporary care and maintenance. In Chile, a state of catastrophe has been declared. We have also seen temporary cutbacks and risks to suspensions in Canada, the DR Congo and Australia.

In Peru, the government has taken measures to prevent the spread of the pandemic throughout the mining industry. Mining companies have been asked to only mobilise critical employees to mine sites, to implement an emergency plan adapted to the circumstances, and to ensure health protection for a 15-day period, from 19 March. Critical employees might comprise those who work in environmental or safety functions such as water treatment plants, ground stability, tailings monitoring, underground ventilation and security. This would mean that mining operations would effectively go under care and maintenance for 15 days.

Chile has also stepped up its response. The government declared a state of catastrophe starting March 19, as the confirmed cases of coronavirus continued to rise. This measure gives the government the capability to control the food and medical supply chains and distribution, border protection, and to enforce curfews and restrict social gatherings. Immediately after the announcement, Codelco said it would maintain “operational continuity" for 15 days in all is units.

The most noteworthy announcements to date, in terms of significance to the global copper market, have been from authorities in Chile and Peru, who are both pointing to a 15-day disruption. All out closures in Peru and Chile for 15 days, would see 1.5% wiped from global annual supply. While this is significant, it would be absorbed by our disruption allowance. It is also not likely to be long enough to trigger force majeure on shipments.

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Posted By : Yogender Pancholi on Thu, 26 Mar 2020
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