Accident at the world's second largest copper mine worsens an already tight supply market.

The global copper market is facing an additional blow: a massive mudslide at the Grasberg mine in Indonesia has resulted in the death of two employees and five others missing. Freeport-McMoRan Inc. has announced that the incident is an act of force majeure. The demand for this essential metal in electronic products has skyrocketed, driven by the trends of energy transition and artificial intelligence. However, copper mines from South America to Central Africa are facing a series of accidents and disruptions, leading to a tight supply. Grasberg is the world's second-largest copper mine, accounting for 3% of global production. Freeport, based in Arizona, USA, warned on Wednesday that it may not be able to fulfill supply contracts for the mine, while also lowering copper and gold production expectations for the season. This move caught many market participants by surprise, pushing copper prices on the London Metal Exchange above $10,300 per ton, not far from the historical high of $11,104.50 per ton set in May 2024. "The scale is very large," said BMO Capital Markets analyst Helen Amos. "This is happening at a time when copper supply is already quite tight. Under the same conditions, this will lead us to face a new price mechanism that is higher than before." Freeport's stock price fell nearly 17% on Wednesday, marking its largest drop in five years.