BHP’s Escondida restart eases tight copper market

BHP, the world's largest copper producer, is gradually restarting operations at its Escondida mine in Chile following a fatal accident that halted activities. The mine's resumption comes amidst a tight copper market, driven by weak inventories and strong demand. Escondida, the globe's biggest copper deposit, was halted on the same day COMEX copper prices hit a record high of $6.83 per pound before settling at $6.76.

Mine president Alejandro Tapia confirmed the fatality earlier in the week. BHP stated that it is evaluating conditions for a gradual restart, considering worker welfare, operational readiness, risk controls, and regulatory requirements.

The market's tightness is further compounded by China's near-cyclical low inventories as the country approaches back-to-back holidays that will temporarily curb restocking. Meanwhile, global refined consumption has been outpacing supply. Shanghai Futures Exchange copper stockpiles are at around 47,000 tonnes, near a cyclical low ahead of China's Mid-Autumn Festival and National Day Golden Week holidays, which are expected to pause restocking by Chinese consumers.

Despite shallow and short-lived price declines, copper fabricators cannot defer purchases for long due to market dynamics. Global mine production in July stood at an annualized 23 million tonnes, a 4% decline from the previous month, while refined demand rose 3% to an annualized 29 million tonnes and refined supply fell 1% to 28.4 million tonnes.

Escondida's restart is crucial for balancing this supply-demand equation, with BHP accounting for about 2 million tonnes of copper production in its latest financial year, accounting for over half of the miner's underlying EBITDA for the first time. The company is also planning a new concentrator at Escondida as part of a pipeline project that could boost group copper output by about 40% by fiscal 2035.