By Callum Keown
claudio reyes/Agence France-Presse/Getty Images
Ongoing civil unrest in Chile could lead to high copper prices and provide a boost for Freeport-McMoRan /zigman2/quotes/200215692/composite FCX +2.74% and a number of other U.S. mining stocks, according to CFRA Research.
Chileans have taken to the streets over the past month in violent protests against inequality, privatization and the rising cost of living in the country, which is the world’s largest copper producer.
A nationwide strike caused heavy disruption on Tuesday but the nation’s copper mines said they maintained operations despite some delays and supply chain disruption.
However, investment research firm CFRA said the continued civil unrest could exacerbate copper supply-side constraints and support higher prices.
Metals and mining analyst Matthew Miller said Southern Copper Corporation /zigman2/quotes/205202467/composite SCCO +1.09% , Teck Resources /zigman2/quotes/208435438/composite TECK +1.91% and Canadian-based First Quantum Minerals /zigman2/quotes/209694942/delayed CA:FM +5.80% could also benefit.
He added that while production had not been impacted yet, there were higher risks of larger-scale union strikes, which would cause supply shocks.
Last year Chile accounted for 29% of the world’s copper production — 5.8 million tonnes — more than double that of the next largest country Peru, which produced 2.4 million tonnes, according to the World Bureau of Metal Statistics.
Copper prices slipped to $5,823 a tonne on Thursday after U.S. President Donald Trump threatened to impose further tariffs on China, despite recent progress between the world’s two largest economies on the issue of trade.
Benchmark copper on the London Metal Exchange hit three-month highs of $6,011 a tonne last week as hopes were raised of an end to the trade war.
Benchmark copper on the London Metal Exchange has now fallen 11% since yearly highs in February.
Matthew Miller, metals and mining analyst at CFRA Research, said: “CFRA forecasts a structurally tight copper market that could be poised for a strong recovery; for the best leverage to copper prices we highlight copper miners First Quantum Minerals, Freeport-McMoRan, Southern Copper and Teck Resources.”
Freeport-McMoRan, the world’s largest publicly traded copper producer relied on sales of the precious metal for more than 70% of its revenue last year. In 2019 it has struggled due to lower copper prices and slow output at its Grasberg mine in Indonesia, which is in transition from an open pit to an underground mine. First Quantum is one of only a few “pure-play” copper companies, while copper is set to become an increasingly important part of Teck’s diversified portfolio. CFRA also said Southern Copper Corporation had copper reserves of 68.4 million tonnes.