Copper prices are dropping
Since the beginning of 2015, copper prices have dropped by 17%, which has impacted all major mining companies. This fall in metals is due to the Chinese economic slowdown and the oversupply situation in copper. Copper’s weak performance has forced major copper miners to cut back on production and postpone mine expansion plans.
Freeport-McMoRan (FCX), one of the world’s largest copper producers, announced several production cuts in 2015 because of falling copper prices. In August, it announced its plan to suspend mining operations in its Miami mine and decrease its Tyrone mine production by 50%. This would remove around 70,000 tons of copper from the market annually.
In September 2015, Freeport announced its decision to cut the copper output of El Abra mine in Chile by 50% because of the slump in copper prices. This move will reduce the mine’s output by 83,000 tons. Freeport said that it expects copper prices to improve in the future. Freeport’s management thinks that the production cuts will give it a better opportunity to sell its production in the improved copper market in the future.
On October 22, Freeport announced that it will decrease its copper production from its Sierrita mine by 50% and plans to close the mine eventually. The move will reduce the annual copper production of Freeport by 45,000.
Anglo American and Glencore
At the beginning of September, Glencore (GLEN) announced its plans to close its Mopani operations in Zambia and the Katanga mine in Congo for a minimum of 18 months. This shutdown of African mines would reduce the company’s copper production by 400,000 tons, which is almost 20% of its annual production.
At the end of September, Chile’s second-biggest copper mine, Collahuasi, announced its plans to cut output by 30,000 tons because of challenging market conditions. The Collahuasi mine is jointly owned by Anglo American (AAUKY) and Glencore (GLEN). On October 14, Collahuasi declared that it is postponing its mine expansion plans because of the disappointing performance of copper.
Asarco announced production cuts
In August, copper prices reached a 6.5-year low because of the slowdown in the Chinese economy. In reaction to the copper prices, US copper producer Asarco curtailed its mining operations at its Ray mine in Arizona. The Ray mine is one of the largest copper reserves in the world with estimated reserves of one billion tons of copper ore. The company also announced its plans to shut down its Hayden concentrator in October. Asarco’s move will cut the company’s copper production by approximately 30,000 tons annually.
Unlike the above mining companies, BHP Billiton (BHP) and Rio Tinto (RIO) are ramping up their copper production. We’ll look into the reason behind their decision in the next article. The fall of copper prices to six-year lows in August resulted in a downfall in prices of base metals, mining stocks, and base metal ETFs. The PowerShares DB Base Metals Fund (DBB) has fallen by 20% since the beginning of 2015.