Copper Supply Watch 21st April 2017

Copper disruptions baton passed on, but supply fears recede

Concerns over constrained copper supply have not gone away. Fresh disputes have broken out, but for now higher scrap
availability and demand side worries have dampened spirits. The net result looks to be another year in surplus, with the
prospect of a larger one next year likely to cast a shadow.

The strike at BHP-controlled Escondida may have ended, but it may take months for it to ramp up to normal levels,
while disputes have since erupted at other major mines. Coppers earlier price strength, however, has drawn out scrap
helping to mitigate low mine supply.

Rio Tinto, which also holds a 30% stake in Escondida said output at the mine fell sharply to 94,900 tonnes of copper
(67,700 tonnes in concentrate, 27,200 tonnes cathode) in the first quarter. This compares with 240,100 tonnes and
260,600 tonnes in the preceding quarter and Q1 2016 respectively. We understand that output began to wind down in
January ahead of the 43-day long strike which began in February. Furthermore, a return to normal production is not
seen until July.

400 Escondida quarterly copper output

350

300

250
'000 tonnes

200

150

100

50

0
Q1-11
Q2-11
Q3-11
Q4-11
Q1-12
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
Q2-16
Q3-16
Q4-16
Q1-17

Cu-in-conc Cu cathode

Supply problems looked to have dialled down at Freeport McMoRans Grasberg mine in Indonesia with an agreement
reached with the government over the resumption of concentrate exports. But the union there is now threatening to
strike. Elsewhere, industrial action at Southern Copper in Peru entered its 11th day on Thursday (20th April), though the
company maintained production had been little affected.

Despite a host of disruptions, secondary supply has played an important role. Scrap supply surged after copper prices
took off last November. Significantly, China-based consultancy BGRIMM expects Chinese copper scrap imports to
increase for the first time in four years in 2017, by some 3%. Double-digit rises have been seen to date. Meanwhile, the
countrys secondary output is seen rising 8% this year after a 9% fall in 2016. Mine supply may be tight, but surplus
remains the order of the day for refined metal.

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by bernd.sischka@thomsonreuters.com on 04/21/2017 13:26:07