Copper Prices Rise as Freeport-McMoRan Declares Force Majeure at Grasberg Mine

Copper prices surged on Wednesday following Freeport-McMoRan’s announcement of force majeure on contracted supplies from its Grasberg block cave mine in Indonesia, further tightening an already constrained market. Three-month copper contracts on the Chicago Mercantile Exchange traded above $10,400 (C$14,461) per tonne as the news rippled through commodity markets.

The declaration of force majeure—a legal provision that exempts companies from fulfilling contractual obligations due to circumstances beyond their control—signals significant disruption at one of the world’s largest copper mines. The Grasberg operation in Papua, Indonesia, is a cornerstone of global copper supply, producing approximately 1.2 billion pounds of copper annually.

Industry analysts note that this supply disruption comes at a particularly sensitive time for copper markets. Global inventories were already tracking at multi-year lows, with stockpiles at major exchanges such as the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE) depleting steadily throughout 2023 and into 2024.

“This is exactly the type of supply shock the market has been fearing,” said Malcolm Richards, senior metals analyst at Global Commodities Research. “With inventories already tight and demand showing resilience, particularly from the green energy transition and electric vehicle sectors, any major disruption from a tier-one asset like Grasberg has immediate price implications.”

Freeport-McMoRan, headquartered in Phoenix, Arizona, has not yet provided details on the nature or expected duration of the disruption. The company’s share price reacted positively to the news, rising approximately 2.3% in Wednesday trading as investors anticipated higher copper prices offsetting lost production volumes.

The Grasberg operation has faced challenges in the past, including the complex transition from open-pit to underground mining that began several years ago. The block cave mining technique used at Grasberg involves undercutting an ore body, allowing it to collapse under its own weight—a method that brings efficiency but can also introduce operational complexities.

Market participants are closely monitoring the situation, as prolonged disruption could exacerbate what many analysts already describe as a structural deficit in copper supply. The red metal, essential for electrical wiring, construction, and renewable energy infrastructure, has seen investment in new production capacity lag behind projected demand growth.

“We’re already looking at a potential copper deficit of 500,000 tonnes this year before accounting for this disruption,” noted Sophia Chen, commodity strategist at Eastern Capital Markets. “The energy transition alone is expected to double copper demand by 2035, and supply simply isn’t keeping pace.”

The price movement reflects growing concerns about copper availability in coming months, particularly as manufacturing activity shows signs of recovery in China, the world’s largest copper consumer. Chinese fabricators and end-users may now face additional challenges securing adequate supplies.

Regional impacts are expected to be significant, with Indonesian export figures likely to take a hit in the coming months. The country has positioned itself as a critical supplier of metals essential to the energy transition, including copper and nickel.

Industry observers point out that this supply disruption underscores the fragility of global copper supply chains. Mining projects face increasing challenges from declining ore grades, water scarcity, and stricter environmental regulations, making new production more difficult to bring online.

“This is a reminder of how concentrated copper supply remains,” said Roberto Vega, mining analyst at Resource Capital Research. “Just a handful of mines account for a significant portion of global production, so when one major operation like Grasberg experiences problems, it reverberates through the entire market.”

The timing of Freeport’s announcement coincides with increased investment interest in copper and other critical minerals essential for decarbonization. Major mining companies have been actively seeking to expand their copper portfolios through acquisitions and exploration, recognizing the metal’s fundamental role in the energy transition.

As markets digest the news from Grasberg, traders will be watching for any signs of similar disruptions at other major copper operations worldwide, as well as for indications of how long Freeport’s force majeure might last.