November 29, 2022

Workers at BHP’s Escondida copper mine in Chile reached an agreement with the company early Monday morning, thus avoiding a strike that was scheduled for this week. The workers were threatening to strike due to safety concerns, according to Reuters. The new agreement alleviates these concerns, as it contains” concrete and verifiable measures to improve the hygiene and safety of workers,” according to union statements. At 1.01 million mt, the Escondida copper mine produced nearly 5% of the world’s output last year, based on USGS and BHP data. (Source: Reuters, BHP, USGS)

AEGIS notes that the Chilean news is likely neutral to bearish for LME copper prices. Supply issues from neighboring Peru remain, and the copper market continues to grapple with flip-flopping COVID policies from China. The LME Copper 3M Select last traded at $8,072.50/mt (7:00 AM CST) and is up 8.2% in November. Even with the recent rally, this still could be a good opportunity for end-users to hedge future needs into 2023 and beyond by buying swaps. Such positions are standard for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (11/29/2022)

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