Published February 7, 2023 12:09pm ESTCOPPER SHORTAGE GETS...

Published February 7, 2023 12:09pm EST

COPPER SHORTAGE GETS REAL.

Chile and Peru account for 37% of global copper supply, but suffering mining setbacks.

A growing copper deficit could impact the market for years to come as mining setbacks in South America mount.

On Monday, copper futures were trading $4.025 per pound after the metal hit a low of $3.9930, its lowest level since Jan. 10 when it traded as low as $3.9875, according to CME data.

Currently, Chile is the world’s largest copper producer and accounted for 27% of global supply in 2021, according to the World Economic Forum, but recorded a 7% year-on-year decline in November.

Edward Moya, senior market analyst at OANDA in New York, told FOX Business "Peru, which accounts for 10% of global copper supply, and Chile, have experienced too many setbacks with poor ore quality, strikes, and water restrictions."

Now, "The copper market will likely be in a deficit for years to come," he added. "Copper demand was solid in 2022, and if we see a robust reopening from China, prices could rally significantly."

In January, copper rose above $9,000 per tonne for the first time since June, as traders anticipated a bounce in Chinese demand following the country’s decision to reopen its borders.

At the time of China’s reopening, copper was up roughly 8% year-to-date but is now just 5% above the redline after slipping around 4.5% the last five days. Over the last year, copper is now approximately 10.5% lower.

Halfway through the session on Tuesday, copper is down roughly 0.09% to $4.03.

The red metal fell sharply in mid-2022 as the global economy slowed, interest rates rose, and the dollar strengthened.

Copper is a valuable indicator of economic health due to its industrial uses in electrical equipment and machinery.

A decrease in supply could imply global inflationary pressures are getting worse, and central banks will maintain their hawkish stance to cool consumer prices and strengthen currencies.