MW: Copper prices may get a break as Glencore suspends two big mines
Copper prices may have won some support in moving off their lowest levels in years, with an assist from one of the world’s biggest mining companies.
Metals and commodities trading firm Glencore PLC GLEN, +7.06% said Monday it’s aiming to cut net debt by about $20 billion. The plan includes suspending operations at two copper mines for 18 months in a bid to lower operating costs.
The Katanga and Mopani mines are located in the Democratic Republic of the Congo and Zambia, respectively, and their suspensions will remove about 400,000 tonnes of copper cathode from the market, which are “substantial reductions” by Glencore to copper output, said Credit Suisse in a research note.
The “proactive management of copper should not only reduce operating costs but also support the copper price,” said Bernstein analysts led by Paul Gait in a note, of the Glencore move.
Copper prices HGZ5, +1.60% this year have been driven to lowest since 2009. Recent losses for copper came on the heels of China’s devaluation of the yuan, on the thinking that such a move may slow the country’s imports of the industrial metal.
Copper prices have tumbled nearly 17% this year, which is roughly the same amount that was lost in all of 2014. A decline for 2015 would be the metal’s third losing year in a row.
Glencore’s operational reviews could leave both mines partially shut down in the coming six months, and “implementing the cuts should be accretive to copper market fundamentals,” said RBC, which had expected a surplus of copper in 2015 and 2016.
Glencore’s announcement is also “a positive” for copper producers, said Bernstein, noting that shares of copper producer Antofagasta PLC ANTO, +7.53% climbed Monday.
Copper rose roughly 2% on Monday. Such a price move “improves the chance the metal has formed an interim base after hitting fresh six-year lows two weeks ago,” wrote Jasper Lawler, market analyst, at CMC Markets.
