Copper production by top global miners slid in the third quarter on an annual basis amid labor woes in North and South America.
Output plummeted 4.4% to 3.4 million tonnes in the third quarter and dropped 1.3% over the second quarter, according to an analysis of the top 20 copper producers by S&P Global Market Intelligence.
Though third-quarter copper production fell among the top 20 copper miners, prices for the red metal remained strong, underpinning profits. Copper demand is expected to soar as global economies electrify to reduce carbon emissions.
"I think the fundamental theme in the quarter was that we saw balance sheets continue to strengthen and more companies focus on organic growth," said Stefan Ioannou, a base metals mining analyst with Cormark Securities.
Among the top 20 copper miners, Codelco's output dropped the most in the third quarter compared to last year, down 25%, or 112,000 tonnes, to 335,000 tonnes, with striking workers at the company's Andina Division disrupting operations, according to media reports. The company reached a labor deal with workers in September.
Brazil-based Vale SA grappled with labor issues at its Sudbury operations in Canada during the quarter and cited a strike as a factor behind weak quarterly copper output, which fell 20.4% to 68,900 tonnes. The diversified miner struck a five-year collective bargaining agreement with workers in August, ending a nine-week labor dispute.
Of the 20 top copper producers, output fell for 14 companies and increased for six year over year. Among the top five copper miners, Freeport-McMoRan Inc. was the only one to report rising production in the quarter, with output growing 17.0% to 362,874 tonnes year over year.
On an Oct. 21 earnings call, Freeport-McMoRan management said the ongoing ramp-up of an underground expansion at its Grasberg copper-gold mine in Indonesia drove the increase, with third quarter output hitting 90% of its annualized target.
"We're now on track to reach full rates [of] metal production by the end of the year," Freeport Chairman and CEO Richard Adkerson said on the call.
Among the top 20 copper producers, Zijin Mining Group Co. Ltd. had the biggest production increase, producing 52,859 tonnes of copper, up 46.11% year over year.
The overall decline in third-quarter copper output came amid expectations of supply deficits in the copper market until at least 2025 as copper demand skyrockets amid global decarbonization. S&P Global Market Intelligence has forecast deficits of about 248,000 tonnes in 2021, 118,000 tonnes in 2022, 136,000 tonnes in 2023, 220,000 tonnes in 2024 and 279,000 tonnes in 2025.
"We expect the refined copper market to stay in deficit into 2022, albeit at a diminished 118,000 tonnes, although we have slightly reduced our global copper demand forecast considering that rising energy prices, labor shortages and supply chain and logistical bottlenecks will impact the global economic recovery," Market Intelligence analyst Aline Soares said in a Nov. 17 report.
Ioannou also cast copper's longer-term market fundamentals as solid; copper is an important material in construction, green energy and a wide range of consumer products.
"Anyone who has the patience and the risk tolerance to wait for the medium- to long-term outlook to play out will benefit from a very strong macro picture," Ioannou said.
