Copper rises after court strikes down mine contract
Panama’s president said copper mine Cobre Panama would be shut down after its contract was ruled unconstitutional by the country’s Supreme Court on November 28. The contract gave First Quantum, a Canadian mining company, the right to operate the mine for 20 years if it paid $375 million to the government of Panama annually. The mine began operating in 2019.
Why it matters: The mine produces about 1.5% of the world’s copper supply. Should the mine shut down permanently, it would send a ripple effect through the commodity with low inventories.
A copper increase of 6%–8% went into effect on December 5. The increase is supported across copper suppliers with the rise in Comex and lower mine inventories.
Big picture: The year-to-date copper average is $3.86. In 2022, the annual average was $4.01.
More on mines: Nine workers were killed and 10 were injured in an attack on a gold mine in Peru on December 2. Security against illegal miners and criminals targeting mines has become a major concern, and cost, in the industry.
Aluminum demand continues to soften
The year-to-date aluminum average is $1.27. The 2022 aluminum average was $1.54.
Steel vendors start December with price increases
Steel vendors announced their second price increase for December on Monday, December 11. They took a 3%–5% increase in steel prices on December 4 as maintenance on mills reduces supply to the markets. After seeing support for the first increase, they took another 3%–5% price increase. Pricing at these levels will be good for roughly one week.
Why it matters: Steel pricing through December will depend on maintenance schedules and how quickly furnaces are brought back online.
Oil prices fall after announcement of voluntary production cuts
The Organization of the Petroleum Exporting Countries and allies like Russia (OPEC+) agreed on voluntary output cuts of 2.2 million barrels per day for the first quarter of 2024. Since the November 30 announcement, oil prices have declined as investors are unsure if oil producers will implement the voluntary cuts.
Why it matters: Oil is just one indicator for PVC pricing. PVC pipe prices are holding after an increase in late October. Overall, the market continues to decline as demand for PVC softens.
News roundup
The Federal Reserve (Fed) meets Tuesday, December 12–Wednesday, December 13. The Fed is expected to hold interest rates steady at 5.25%–5.5% for the third meeting in a row. Fed Chair Jerome Powell said it is too soon to speculate when the Fed will ease up on its monetary policy and begin to lower rates.
We continue to watch the development of the Israel-Hamas war. So far, the war has not disrupted oil in the region. As the war continues, its duration and effects on the surrounding region will determine any impact on the commodity market.