An 18% year-to-date decline in the copper price could be reversed after two large miners indicated they may produce less copper metal than previously expected.

Freeport-McMoran (FCX:NYSE), one of the biggest copper producers in the world, says it will consider cutting output following a sharp decline in the metal price. It will carry out a review of operations and report revised plans during the third quarter of this year.

The industry needs to reduce copper output in order to stop the commodity price weakness. 'The copper market is shifting into surplus, based on our estimates, as demand growth is slowing and supply growth is possibly accelerating,' says Jefferies analyst Christopher LaFemina.

'The declining copper price has been especially painful for highly leveraged copper miners such as Freeport and First Quantum (FQM). Now, with potential production cuts from Freeport and power supply issues limiting copper production from First Quantum and others in Zambia, the copper market is more likely to be balanced.'

LME-Copper Grade A 3 Months U$MT - Comparison Line Chart (Actual Values)

Yet another downgrade to 2015 production guidance from Antofagasta (ANTO) will help fuel market expectations that copper won't drop any further in value in the near-term.

The Chile-based miner reveals (29 Jul) commissioning problems at its newly-built Antucoya project. A delay to going into commercial production will mean Antofagasta produces approximately 5% less copper than previously expected this year at 665,000 tonnes.

Freeport's cost-cutting plan sent its shares up by 8.4% yesterday on the New York market to $12.33, yet Antofagasta's reduced output guidance prompts its stock to fall 0.6% to 582.5p on the London Stock Exchange.


Prior to Freeport's announcement, copper had dropped from $6,300 per tonne (for delivery three months in the future) at the start of the year to $5,188 per tonne. It has since rebounded to $5,297.5 per tonne.

Other London-listed copper stocks respond to the likely reduction in global copper supply and anticipated price stabilisation. Kaz Minerals (KAZ) nudges ahead 0.8% to 169.3p and Vedanta Resources (VED) rises 1.5% to 407.15p.

Issue Date: 29 Jul 2015