Copper Shortage? First Quantum's Cobre Panama Mine Shuts Down, Threatening Supply Balance

Panama's government has formally ordered the shutdown of the First Quantum Minerals FM Cobre Panama copper mine.

Months of protests disrupted the region and led to a tragic event. Panama's Supreme Court subsequently ruled the mine's operating contract unconstitutional.

The Ministry of Commerce and Industry instructed the Canadian company to cease all operations at the Cobre Panama site, contributing to approximately 5% of Panama's gross domestic product.

First Quantum's Panamian subsidiary is now requesting authorization to terminate the contracts of more than 4,000 employees. The announcement sent ripples through the regional economy that will cause the loss of as many as 33,000 indirect jobs.

The global copper deficit is projected to persist throughout 2023, perhaps the rest of the decade. This additional development threatens to amplify the issue, given the region accounts for almost half of copper's global production. Peru, the second-biggest copper producer, boasts 10% of the global supply.

“We're already forecasting major deficits in copper to 2030," said Wood Mackenzie's Vice President of Metals and Mining, Robin Griffin. “We're already forecasting major deficits in copper to 2030," said Wood Mackenzie's Vice President of Metals and Mining, Robin Griffin.

"Anytime there's political unrest, it has a whole range of effects. And the obvious one is the potential for mining sites to have to close," he added.

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Driving Into A Copper Deficit

A growing demand for electric vehicles is expected to drive long-term demand for copper. The International Energy Agency estimates that the global electric car market share rose from 4% in 2020 to 14% in 2022 and could reach 18% by the end of 2023.

According to Bloomberg's Dr.Kwasi Ampofo, demand should exceed primary supply within the next four years, resulting in prices surging as much as 20%.

The sudden closure of major mines, such as the Cobre Panama, and production cuts by leading miners like Anglo American AAL drive the market in that direction. The removal of around 600,000 tons of expected copper supply has shifted projections from a surplus to a potential deficit, with significant implications for global markets.

In such an environment, copper might find itself between a rock and a hard place – blamed for choking economic growth in case of loosening monetary conditions that would re-ignite industrial capital expenditures.

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