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Copper Producers and Freeport-McMoRan’s Indonesia Woes

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Freeport’s Indonesia woes

Freeport-McMoRan (FCX) owns the Grasberg copper and gold mine in Indonesia (EIDO). Rio Tinto (RIO) is Freeport’s partner in the mine. RIO also owns the Oyo Tolgoi mine in Mongolia through its subsidiary Turquoise Hill Resources (TRQ).

The Grasberg mine has been in the headlines for the past couple of years, mostly for negative reasons. As of February 22, 2017, Freeport-McMoRan is barred from exporting copper ore from the Grasberg mine. To make things worse, the company has started curtailing production at the mine and seems headed for arbitration with the Indonesian government.

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Escondida strike

According to the ICSG (International Copper Study Group), Indonesia was the 13th largest mined copper producer in 2014. The ICSG lists the Grasberg mine as the world’s second-largest copper mine by capacity on the basis of 2015 data.

BHP Billiton’s (BHP) Escondida mine is the largest copper mine globally. It’s worth noting that the mine is facing a labor strike.

With the biggest two copper mines facing production issues, copper prices are getting a natural boost. Copper prices as well as copper miners (XLB) (SCCO) have risen amid supply concerns.

Series overview

In addition to supply issues, other factors such as demand are influencing copper prices. In this series, we’ll look at some of the recent copper demand indicators. We’ll also see what the shutdowns at the Escondida and Grasberg mines could mean for the global copper market.

Let’s start by looking at the recent trend in copper prices.

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