(Bloomberg) -- Copper bears beaten down by a dizzying 50% rally may be finding some solace in news out of Chile.
The country that accounts for a quarter of global supply is finally reining in a surge in Covid-19 cases that has been fanning fears of a slowdown in production. On Thursday, the metal settled at $6,436.50 a ton on the London Metal Exchange.
To be sure, infections in Chile continue to rise and thousands of miners have fallen ill. But numbers in the past few weeks indicate that a tightening of restrictions is working. State-owned Codelco said this week that daily cases at its mines had fallen 66% from mid-June levels.
At the same time, unions that have been clamoring for a bigger say in Covid-19 protocols seem to be getting their wish. Seven umbrella groups representing about 80% of mine workers reached an agreement this week with the government to set up a “tripartite” working group.
While authorities have determined that the vast majority of mines are adhering to virus-fighting protocols, they plan to roll out a standard set of rules for the industry.
“Copper prices got very high, very fast” Bart Melek, head of commodity strategy at TD Securities, said by telephone. “The market is a bit more sure that we’re going to get over disruptions in the next few months.”
That’s not to say labor tensions and supply concerns have disappeared.
Chile’s national infection rate is coming down, but on a per capita basis is still among the highest in the world and cases continue to grow in some mining regions. The association of mining companies is yet to agree to participate in the working group. And workers at two mines have voted to strike over wages, threatening to add labor disruptions to the list of supply concerns.
But there’s still time to avert strikes at Antofagasta Plc’s Zaldivar and Centinela mines given Chilean labor rules afford the option of government mediation. One of the unions at Codelco’s Radomiro Tomic mine agreed to put off wage talks for a year to effectively push forward the risk of disruptions.
The latest production result also suggests the industry is navigating the difficult operating conditions. Output at Chile’s No. 2 mine Collahuasi jumped 38% in the second quarter from a year ago, according to co-owner Anglo American Plc.
(Updates with Collahuasi mine production in last paragraph)
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