Freeport-McMoRan Inc. declared force majeure at its Grasberg mine in Indonesia after a massive mud flow left two employees dead and five missing, sending shockwaves through the global copper market. The mine, located on New Guinea, is the world’s second-largest copper source, accounting for roughly 3% of global output, and the timing of the disruption comes amid soaring demand for the metal driven by the clean-energy transition and the artificial intelligence boom.
On Wednesday, Freeport warned it might not meet supply contracts from the mine and lowered its copper and gold production guidance for the quarter. The announcement pushed copper prices on the London Metal Exchange above $10,300 a ton, approaching an all-time high of $11,104.50 reached in May 2024. Freeport’s stock meanwhile plunged nearly 17%, marking its largest drop in five years.
Analysts described the situation as significant. “This is happening when copper’s already fairly tight. All else equal it brings us to a new, higher-price regime than we were looking at before,” said Helen Amos, an analyst at BMO Capital Markets.
The disruption at Grasberg adds to a string of supply constraints that have hit copper production globally. Earlier this year, seismic activity caused flooding at Ivanhoe Mines’ operations in the Democratic Republic of Congo, while port and mill disruptions affected Teck Resources’ Chilean mines. A fatal accident at a Codelco mine in Chile also halted production for over a week.
The combination of rising demand and constrained supply has led major banks, including Goldman Sachs and Citigroup, to project copper prices could surge to $15,000 and $13,000 per ton, respectively. Analysts note that the market deficit is worsening; Amos estimates the global refined copper market could face a shortfall of around 300,000 tons this year, with further disruptions likely to expand the deficit.
“The supply disruptions this year highlight the underinvestment in copper mining over the past decade,” said Bart Melek, global head of commodity strategy at TD Securities. “If problems at Grasberg continue, they will tighten semi-processed copper supply for smelters and give more pricing power to Freeport’s competitors, with ripple effects throughout global supply chains for products that rely on copper.”
